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This Social Security table shows how the average retiree can add $11,500 to his annual benefit. the furry fool

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In October 2022, approximately 65.9 million people received Social Security benefits. Most of these recipients – 48.39 million to be exact – are retired employees, for whom the program was designed in the 1930s.

For many of these retired workers, Social Security income isn’t just a check. This is a significant portion of their monthly income needed to meet their needs. When the national poll poll Gallup surveyed retirees earlier this year, it found that 55% consider their monthly payment their “main” source of income, while a total of 89% of respondents use it to some degree to cover their expenses. trusted it.

Given the importance of Social Security to current retirees and its expected role for future generations during the golden years, getting as much Social Security as possible is imperative.

Image source: Getty Images.

Four main inputs determine how your Social Security benefits are calculated.

While there are more than half a dozen factors that can affect what retired Social Security workers take home, four of these factors stand head and shoulders above the rest.

For one thing, a person’s employment history and earnings history largely determine what their retirement benefits will be at full retirement age. The Social Security Administration (SSA) takes into account a worker’s 35 highest-earning, inflation-adjusted years when calculating their monthly benefits. For those who work under age 35 each year, the SSA averages $0, which can actually lower an employee’s retirement benefit.

Aside from employment history and earnings history, the third important factor is the individual’s year of birth. Your year of birth helps determine your full retirement age, ie the age at which you are eligible for 100% of your monthly pension benefit. Without delving too deeply into the weeds (because I’ll go into more detail on this in a moment), claiming benefits before your full retirement age will permanently reduce monthly payments. Likewise, waiting until you reach full retirement age can increase your monthly benefit by more than 100%.

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The fourth and last all-important factor is claiming age. While no one can control when they are born, they do have the option to choose when they start receiving their Social Security benefits. As you’ll see, that choice could have major implications for the dollar.

This chart can determine your financial well-being in retirement

As I mentioned back in the summer, the Social Security age table has the potential to determine your financial well-being in retirement.

The main difference between Social Security income and claiming age is that retirees are encouraged to wait to collect their monthly benefit. Depending on their year of birth, a qualifying retiree can see their monthly benefit increase by up to 8% per year, up to age 70, for every year they patiently sit on their hands. This means that there is a very large gap in potential monthly benefit outcomes between the first age of eligibility (62) and the age at which benefits stop accruing (70).

year of birth age 62 63 years 64 years 65 years 66 years 67 years 68 years 69 years age 70
1943-1954 75% 80% 86.7% 93.3% 100% 108% 116% 124% 132%
1955 74.2% 79.2% 85.6% 92.2% 98.9% 106.7% 114.7% 122.7% 130.7%
1956 73.3% 78.3% 84.4% 91.1% 97.8% 105.3% 113.3% 121.3% 129.3%
1957 72.5% 77.5% 83.3% 90% 96.7% 104% 112% 120% 128%
1958 71.7% 76.7% 82.2% 88.9% 95.6% 102.7% 110.7% 118.7% 126.7%
1959 70.8% 75.8% 81.1% 87.8% 94.4% 101.3% 109.3% 117.3% 125.3%
1960 or later 70% 75% 80% 86.7% 93.3% 100% 108% 116% 124%
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Data source: Social Security Administration. Table by author.

What you see in the table above is visual proof of how patience can be rewarded with Social Security. For example, according to the SSA, the average retired worker received $1,676.53 in October. Using this as an arbitrary example of full retirement age, the difference between claiming early and waiting until age 70 is staggering. For those born between 1943 and 1954, a first claim would equal the permanent deduction of $419.13/month. Meanwhile, claiming at age 70 would add $536.98/month. That’s a $955.62 monthly difference, or about $11,500 annual swing in Social Security income.

For those born in 1960 or later, it’s much the same. Claiming early results in a permanent 30% reduction in your payout, which equates to $502.96/month. On the other hand, delaying until age 70 before claiming your benefits can increase your benefits by $402.37/month. That’s a difference of $905.33/month, or nearly $10,900 per year.

Given the difference in annual payments of this magnitude, you’re probably wondering why more retirees aren’t delaying collecting their benefits. The answer is because claiming age is kind of bullshit. While a big monthly profit sounds great, the ultimate goal should be to increase your Lifespan benefit from the program. Sometimes it makes sense to take your winnings early.

With the understanding that everyone’s situation will be unique, people with chronic health conditions or who want to reduce their debt burden may be encouraged to collect their Social Security benefits early. Conversely, retirees who plan to rely on Social Security as their primary source of income, or who believe they are in good/excellent health, may choose to wait and increase their payments over time. can grow.

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Regardless of your choice, this Social Security table can go a long way in helping you determine how financially strong you will be when you retire.

Source: www.fool.com

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