Your Social Security Benefit in 4 Easy Slides

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Learn the basics of how your monthly Social Security benefit is determined and what you can expect to receive when you retire.

Learn the basics of how your monthly Social Security benefit is determined and what you can expect to receive when you retire.

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  • 1. Your Social Security Benefit in 4 Easy Slides
  • 2. The 2 Keys to Social Security Benefits Your benefits are determined by: • Average earnings in your 35 topearning years • The SSA’s formula for figuring monthly benefits
  • 3. Figuring Your Top-Earning Years You have to adjust early-career years for inflation. • Index factors are provided by SSA and are based on average wages in each year. • Example: Compared to earnings in 2013, earnings in 1991 are worth more than double. Earnings in 1963 are worth 10 times as much. • Once you adjust by factors, take the 35 best years and add up the indexed earnings. Divide by 420 to get a monthly earnings amount.
  • 4. Figure Your Primary Insurance Amount Take monthly earnings amount. Apply “bend points” for PIA formula. For those turning 62 in 2014, formula is: • 90% of the first $816 in monthly earnings. • Plus 32% of earnings between $816 and $4,917. • Plus 15% of earnings above $4,917. Round down to nearest dime.
  • 5. Figure Your Actual Benefit Primary insurance amount is what you get if you retire at normal retirement age – currently age 66. • If you retire early, calculate how many months early. Reduce primary insurance amount by 5/9 of a percent for each month up to 36 months, then 5/12 of a percent for each additional month. • If retire late, add 2/3 of a percent for each month after normal retirement age. As late as age 70.
  • 6. The Top Stock for 2014