What’s Involved in Calculating Your Benefits?
Have you ever wondered where the Social Security and Medicare deductions went from your payroll checks? For those born after the year 1929, there is an acronym, “AIME”; this stands for Average Indexed Monthly Earnings. Your AIME value represents contributions from the highest grossing 35 years of work performed during your lifetime. For those who didn’t work at least 35 years, years not worked will be calculated as 0. From these calculations, we get the Primary Insurance Amount or “PIA”. Those who delay retirement can get up to 8% more benefits per year of delay until age 70. If you cannot delay your retirement, you’ll get the lesser of the benefits.
How are Taxes Applied to Social
Security Benefits?
Government defines this combined income as:
The sum of adjusted gross income for married couples
Any non-taxable
interest.
Half of your combined Social Security benefits (50%).
below to see what portion of your Social Security benefits will get taxed.
How Pensions Affect Social Security
Social security is expected to supplement approximately 40% of your livelihood in retirement. Ideally, you will have other sources of retirement income besides social security, such as pensions and retirement accounts.
You may be wondering how your pension will affect your social security benefits. If the source of your pension is where you paid social security taxes, then your social security benefits should not be reduced. If you did not pay social security taxes, however, your pension could cause your social security allotments to decrease. Many federal, state and local government jobs, as well as many non-profit retirement plans fall into the category of pensions that did not pay social security taxes. You can visit the SSA website at www.ssa.gov to help you find out how much of a reduction in benefits you can expect, if any.
Failing to Maximize Spousal Benefits
A considerable benefit to filing as a couple is that more benefits are available to you and your spouse. With longevity rates increasing, there are numerous aspects to take into consideration to ensure your benefits will last throughout your retirement. Circumstances will require adequate planning and strategy to maximize your benefit. Factors that are necessary to address include the age at which you and your spouse will both file, how to maximize survivor benefits, and the need to file early due to health concerns.
