How to calculate your Social Security benefit each month Every year, the US spends trillions of dollars on Social Security to ensure that recipients receive their monthly payments.
Despite this year’s changes to the Social Security system, the Social Security Administration’s (SSA) fast calculator allows Americans who have contributed to the program throughout their lives to estimate what their retirement wages will be.
For instance, let's say you intend to retire at the end of 2025 and that you will be turning 62 this year, which is the earliest age at which one can begin receiving benefits.
In this case, you are regularly receiving $25,000 in earnings annually and have been for a while. Without accounting for future earnings or price increases, the SSA can calculate that your expected monthly benefit amount would be $822.00.
Do you feel more optimistic or less optimistic about your chances of retiring after seeing that number? There are several things you can do to make sure your retirement funds are in line, so don't panic if you're worried about how the numbers are playing out.
If your Social Security benefit is too small, what can you do? An yearly take-home pay of $25,000 is not much money by today's standards. Although it's not the only way to make ends meet, living paycheck to paycheck still offers chances to save money, which is crucial when it comes to retirement.
Consider postponing retirement and continuing to work for a few more years if you are concerned that your Social Security income won't be sufficient to pay for your living expenses.
To figure out how much you should actually be saving for retirement, you might also want to speak with a financial adviser. They can help you choose between tax-advantaged investment accounts like Roth IRAs and employer-sponsored plans like 401(k).
You can also begin looking at ways to reduce your lifestyle, such as selling your house, reducing luxury spending, and maintaining a budget that meets your needs while yet giving you some freedom to do as you like in retirement.