Social Security is one of the most complex parts of retirement. It also happens to be one of the most important. So, if you’re looking for help with understanding Social Security and retirement planning, then you have come to the right place. In this article, we will go over some common factors used to calculate your Social Security benefits when you retire. We will also provide you with some helpful tips on how to get started on your own retirement planning.

What is Social Security?

Social Security is a government program that provides retirement, disability, and survivors' benefits to workers and their families. Millions of Americans depend on Social Security for a portion of their income in old age or if they become disabled before reaching retirement age. The majority of people who receive Social Security benefits are retired workers or the spouses, widows, and widowers of retired workers. A small number of people receive benefits because they have disabilities that meet Social Security's definition of a disability, or their children are under age 18 with disabilities that meet Social Security's definition of disabled.

The agency administering Social Security is the National Treasury Retirement System (NTRS) which is part of the United States Department of The Treasury. Based on what was indexed as $14 billion in 1937 when it was first introduced during Franklin Roosevelt's presidency; today its estimated worth exceeds $2 trillion dollars annually. That increase is over 10 times higher than it was originally valued at just over 75 years ago! This means that each dollar invested into this fund would earn an average return rate of around 6% per year over those same 75+ years - which equates to an average annualized return rate above 6%.

1. What is your average monthly income?

Your average monthly income is calculated by taking the total amount of money you've made in a year, dividing it by 12, and then multiplying that number by the number of years you've worked.

This means that if you make $100,000 per year and are retiring at age 65, your average monthly income would be $8,333 per month, assuming that you've made $100,000 every year since you were 25.

2. At what age will you start receiving Social Security benefits?

There are a number of factors that determine when you can start receiving your retirement Social Security benefits and how much they'll be. In general, the earlier you begin collecting benefits, the smaller your monthly check will be. You can also receive an increased monthly benefit for deferring payments until full retirement age or beyond.

The age at which you start receiving Social Security is called "age of eligibility," and it's different for everyone depending on when they were born. The earliest age at which someone can claim Social Security is 62; if you decide to file early, there will be no penalty aside from reduced benefits. However, if you're still working while collecting Social Security - even part-time - then the government will withhold $1 in benefits for every $2 earned above $15,480 per year. In 1977, Congress decided that there should be a maximum income cap during retirement years where withdrawals could occur without penalty. This amount has remained constant since its inception, but experts predict that as healthcare costs continue rising faster than inflation again over time then more adjustments might need to happen sooner rather than later.

3. Does your employer offer a retirement plan?

If you have a pension or other retirement plan offered by your employer, such as a 401(k) or 403(b), any benefits you receive from those plans will be added to the income of your Social Security benefits. This could positively impact the amount of your benefits and how long they last.

4. What is the economy doing?

The next thing that affects your Social Security benefits is inflation.

Inflation is a general rise in the price level, and it's measured by the consumer price index - CPI. Inflation can be positive, which means prices are rising, or negative, which means that prices are falling. When you get your annual cost-of-living adjustment - COLA - from Social Security each year, they're actually giving you a fixed percentage increase based on what they estimate will be the change in prices over the year.

Inflation plays an important role when it comes to calculating how much money you'll receive from Social Security for retirement because it's one of many factors considered when determining your monthly benefit amount and how long it will last over time.

5. When do you pay Social Security taxes?

A common question is, "How much do I have to earn to pay Social Security taxes?" As of 2019, if your income is more than $132,900 per year, your employer will automatically withhold an additional 6.2% in Social Security tax from your paycheck. This means that if you make $133,000 annually and are an employee who pays the maximum amount of taxes into Social Security each year, the agency will keep approximately $2,700 of your earnings.

In addition to this automatic deduction from every paycheck over a certain threshold, there are also many high-earning individuals who choose to contribute more on their own because they fall under a special income bracket and want to pay as much as possible into their personal savings accounts for retirement security. If either scenario applies to you or someone close to you, then calculating Social Security tax may be something worth doing before filing taxes.

Contributed to The 55+ Society

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