Most Americans expect to get at least some income from Social Security when they retire. Figuring out exactly how much you'll get from it isn't as simple as you'd hope, because the calculation of your benefit amount takes into account a career's worth of earnings history and other decisions that you make regarding your retirement. Nevertheless, you can estimate how much you'll get from Social Security either by figuring out average earnings by hand or by using a selection of available Social Security calculators for the task.
What goes into figuring out how much Social Security will pay you
Doing a manual calculation of your expected Social Security benefits isn't simple. You have to start by looking at your entire career earnings history. You have to know the maximum wage base limits on which Social Security payroll taxes were charged for each of those years, and you'll have to apply adjustments to index your earnings for inflation. Once you've done that, you'll need to take the 35 individual years that have the highest inflation-adjusted earnings, find the average, and then divide by 12 to get average indexed monthly earnings.
From there, you'll use a formula to determine your primary insurance amount. The formula changes every year, but for those who turn 62 in 2016, take 90% of the first $856, 32% of the amount between $856 and $5,157, and 15% of any excess over $5,157. Add that up, and you'll have your monthly check amount if you take retirement benefits at full retirement age. For instance, if you earned an inflation adjusted average of $2,500 per month throughout a 35-year career, then your primary insurance amount would be 90% of $856, plus 32% of $1,644, for a total of $1,296 per month.
Finally, that amount can vary depending on when you take benefits. Claiming at age 62 can cut your benefit by 25%, while claiming at 70 can boost it by 32%. In the example above, that means you'd get $972 at age 62, or $1,711 at age 70.
Getting estimates done for you
Fortunately, you don't have to use do your own calculations. Several calculators exist to help you figure it out for you, with varying degrees of complexity.
This simple calculator simply has you enter average annual income, current age, and the expected age at which you anticipate taking benefits. It also assumes that inflation will boost Social Security payments by a fixed percentage each year between now and when you claim your benefits. The results tell you how much you'll get and what percentage of your current income will be replaced by Social Security.
In addition, the Social Security Administration offers its own calculators to help you. The Social Security Quick Calculator is similar to the simple calculator above, taking current income, extrapolating back, and estimating future earnings. It makes the most assumptions, and so its results won't be very precise if those assumptions prove incorrect. The SSA's Online Calculator allows you to enter more of your own personal data, including earnings for each past year. This will provide a more accurate estimate based on actual work history, but it still assumes future work history. The Detailed Calculator requires separate installation on your computer, but it gives the most complete picture of all benefits available.
The SSA even offers calculators that tap directly into your work history. The Retirement Estimator uses the SSA's own records of how much you earned to fill in blanks that other calculators make you do yourself.
One other source of Social Security information
Finally, Social Security provides you with a statement that will go through estimates of benefits for you, your spouse, and your children under certain circumstances. Between retirement, disability, and survivor benefits, your Social Security statement has a wealth of information to help you figure out how much you and your family will get from the program.
Estimating your Social Security benefits isn't the easiest thing in the world. With these tools, however, you can come up with solid estimates of your future benefits. Taking the time to use these calculators or to do your own manual calculations will give you the basic information you need in order to plan for your retirement years in a more informed way.
