How Much Will You Get? Estimating Your Social Security Benefits

If you’ve already started drawing Social Security, you already know exactly what your monthly benefit amount is. Hopefully there were no surprises when you got that first check! 

But if you haven’t yet pulled the trigger on when to start receiving benefits, you’ll want to look at your options and estimate which approach or combination of approaches will work best for you.

The Two Big Variables

There are two big variables that make a world of difference in how much you can expect to receive from Social Security when you retire:

1. Your average earnings. Your social security benefit amount is based on your average earnings for your 35 highest-earning years across your lifetime.
2. Your age when you claim. If you retire at the government-designated full-retirement age, you will be entitled to 100% of the benefit you have earned. If you retire earlier than that, your monthly earnings will be docked. And if you wait later than that to claim, you’ll get more money on top of the benefit you’ve already earned.

Maximizing Your Earnings

You can increase your monthly benefit amount by increasing the average of your 35 highest-earning years. Here’s what that could look like:

As a stay-at-home mom, Melinda held part-time and work-from-home jobs off and on until her children were old enough to go to school. Then she went back to school herself, completing her degree in 5 years. After graduation, she took a job as a bank manager and worked from age 50 to 65 before retiring. 

Although Melinda’s last 15 years of earnings were high, they are averaged in with 20 years of low or zero earnings, greatly reducing her Social Security benefits. Melinda liked working, so rather than starting Social Security now, she decided to create a work-from-home business to replace a few of those zero-earning years and increase her benefit amount.

Maximizing your Benefits

If you want to retire early, you can start drawing Social Security benefits as early as age 62, but your benefits will be reduced for each year before full retirement age. Full retirement age for people born before 1960 is 62 years old, but it is moving gradually to age 67 for those born in 1970 or later. 

The latest you can wait to start collecting is 70, and your benefit amount will be increased by 8% for each year after full retirement age you wait to start collecting.

So what does this mean for Melinda, who is now working from home for a few years after retiring from her job to raise her average earnings? She can further improve her retirement picture by not claiming Social Security benefits at the earliest possible time, but instead waiting as late as 70 to begin drawing her benefit. 

A lot of this depends on how successful her business is and her health and mental condition. Can she financially support herself without Social Security during those years? Is she in good health and is working on improving her quality of life, not just her quantity of money? These are considerations each individual will have to make.

Tools to Help Estimate Your Benefit Amount

We know what you want are real numbers though, so here are some tools to help you out:

You can set up your account at the Social Security Administration here. This is where you will be able to see your earnings history and an estimate of what you can expect to receive depending on your age at retirement.

The AARP has a simple and helpful benefits calculator available here.

Remember that with any of these tools, what you are getting is just an estimate. The actual benefit you receive may differ depending on a variety of factors in your personal situation, such as divorces, disability, or caring for a child with disabilities.

Empower Yourself

One of the big reasons so many people don’t want to think about Social Security is that it seems so big and complex. We feel overwhelmed. Don’t let this happen to you if you use one or more benefits calculators and find that your benefits will be smaller than you hoped. 

Knowledge is power. Armed with the knowledge of how your benefits are calculated, you can do the things that are under your control to get your benefits as high as possible, while enjoying your well-deserved retirement.