If You Earn $100,000 in Average Annual Income, Here’s What You’ll Get From Social Security at 67 | Economic news


For anyone born after 1960, the Social Security Administration (SSA) determines that your normal retirement age, which is when you would be entitled to your full benefits, is 67.

But deciding whether or not you should retire at this age can be difficult. You can start receiving Social Security benefits as soon as you turn 62, but applying early can significantly reduce your amount.

You can also wait until age 70 to start taking Social Security (increasing your benefit to the highest possible amount), but maybe you don’t want to wait that long. It depends on where you are in life financially and the state of your health.

Considering all of these factors, it’s a good idea to figure out how much you might receive when you start claiming benefits. Despite its complexity, you can break down the Social Security formula into the basics to calculate your amount. Let’s see how much you would earn if you earned around $100,000 per year (adjusted) during your career and retired at age 67.

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Break down the formula

To begin calculating your benefits, the SSA first calculates your Average Indexed Monthly Earnings (AIME), which looks at the 35 years of your employment history in which you earned the most money.

It looks at your nominal earnings over those 35 years, then indexes (or adjusts) them to figure out what the amounts would have been if you were earning them in the present. So essentially the SSA would take your nominal earnings, starting in, say, 1982 and adjust them for wage inflation over the years to reflect what those earnings would be in 2022.

An example on the SSA website shows that a nominal income of $13,587 in 1982 would have been equivalent to about $52,000 in 2022. But the SSA also has a base salary limit for which a retiree can get credit. . This number is $147,000 in 2022.

To finish getting the AIME, you add up your best 35 years of annual earnings, which are now indexed for inflation. Then you divide by 35 to get the annual amount over that period, then you divide by 12 to get the monthly amount.

Once you have your AIME, the next thing you need to do is calculate your Primary Insurance Amount (PIA), which is your actual monthly Social Security benefit for those receiving full benefits at normal age. of retirement.

It’s also not a simple calculation, but it can be done quite easily by using these three steps and adding the amounts from each step. Here are the numbers for someone who turned 62 in 2022:

  • 90% of the first $1,024 of your AIME.
  • 32% of any amount between $1,024 and $6,172.
  • 15% of the remaining amount above $6,172.

What is your PIA on an annual income of $100,000?

If your best 35 years of indexed earnings averaged $100,000, your AIME would be around $8,333.

  • 90% of $1,024 = $921.6
  • 32% of $5,148 = $1,647.36
  • 15% of $2,161 ($8,333 – $6,172) = $324.15

If you add those three numbers together, you’ll arrive at a PIA of $2,893.11, which equates to about $34,717.32 in Social Security benefits per year at full retirement age. That’s not too shabby considering the maximum benefit is $4,194 per month, and that’s assuming you delay applying until you’re 70.

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