Planning for your retirement can help to ensure comfort in your later years. Often it takes a combination of savings mediums to provide the right amount of income. Social security is a federal program made to provide some security in retirement, but alone it may not be enough. Here you can see how your social security benefits can compliment your current retirement savings. You just need to add a few personal details to the system to get a detailed guide on using your social security benefits.
Will social security be enough?
One of the most significant financial concerns for many Americans is their social security benefit. Beyond that, most are concerned about their readiness for retirement and the mounting cost of health care expenses.
Social security is a federal program that provides income in retirement. Every taxpayer contributes to social security to keep the program running. Currently, 10,000 baby boomers are retiring each day. Over the course of a year, that number becomes shy of 4 million. That means a lot of demand is being placed on this program.
It is essential to assess your needs in retirement and see what benefit social security can provide for your livelihood. Our system guide you on how to budget your savings and utilize your social security.
How much does social security pay?
Social security payments are calculated using a formula that is adjusted for inflation. The equation is based on your highest earnings over 35 years in the workforce. It is also adapted to your age and when you decide to receive benefits. If you worked less then 35 years, zeros are averaged in for the years you didn’t pay social security.
Your earnings are split into three reimbursement stages.
Your monthly earnings up to $749
The revenue from $750 to $3,768
Any income above $3,769
The math is pretty simple. Take 90% from $749 of your monthly earnings, plus 32% of your profits up to $3,768. Then take 15% of your remaining monthly income. The sum of these amounts should equal your initial monthly payment. Minus any Medicare premiums, which are just around $115.
If you sign up for benefits early, at age 62, you will get 25% less of your payment then you would at the age of 66. If you wait until 70, you can increase your monthly benefit by 32%.
Married couples have further flexibility with their payments. Spouses are entitled to their benefit or half of their partner’s benefit if it is higher. Married couples can even begin by taking their partners benefit and later switch to their own. By that time, their payments might be higher too.
If any of this sounds confusing, don’t worry. Our social security calculator can help you crunch the numbers quickly.
Why use this calculator?
This tool can be a helpful for planning your retirement. To use the calculator correctly, you may need to review your finances. This includes your household income, current retirement funds, and the amount you can put towards your savings.
For accurate estimations, you should also have an idea of the income you will need when you retire. Some studies have shown that retirees require between 67% to 80% of income replacement at retirement. However, individual needs will vary. It is essential to take into account long-term care and living expenses, medical costs, and leisure allowance.
With this information, you can see the value of your savings and the time it will last based on your lifestyle. Plus, you can see an in-depth comparison of your savings with and without social security benefits.
Please continue reading for a detailed explanation of how to use the social security calculator.
How to use the calculator
The social security calculator is very straightforward to use. You just have to provide some information about yourself and your retirement plan. Let’s review these details together.
Step 1: Add your current age and expected age of retirement to the first two lines of the calculator. You can use the up or down arrows to assist you in entering this information.
Step 2: On the third line of the calculator you should add your household income. You can combine your income with your partner’s earnings if you are married here.
Step 3: Then you may add your current retirement savings to the fourth line of the calculator. This is the amount that you currently have in your savings account. You may include all sources of retirement savings such as 401(k), IRAs, and Annuities.
Step 4: On the fifth line of the calculator is the percent of income to save. This is the percentage of your yearly earnings you wish to set aside for your retirement.
Step 5: On the sixth line you should include any expected yearly salary increases you may receive. If unsure, it is best to leave this field at a value of 0 and re-calculate as your income changes.
Step 6: The income you will require at retirement can be added to line seven of the calculator. You should evaluate your retirement expenses to quantify how much income replacement you need here. You can express this figure as a percentage of your current annual income.
Step 7: You can add the years you will need retirement income to line eight. That is the total number of years you wish to have your savings last you in retirement.
Please continue to your investment returns.
Your investment returns
This calculator presumes that your retirement savings will be placed into an active investment. Compound interest can help your funds multiply for many years until retirement. Even allocating your capital to a qualified savings account can provide modest returns.
Step 8: On the ninth line you should add your rate of return before retirement. This is the current rate of return you are expecting on your investment.
Step 9: You may adjust your rate of return during retirement on the tenth line. When you retire, you can still make some passive income on a lower risk investment without gambling on your livelihood.
Step 10: On the eleventh line you can adjust your earnings towards an expected rate of inflation. This is used to calculate increases in your retirement expenses and social security benefit. Inflation is forecasted to increase by approximately 2 percent for the next decade. However, this is merely a future prediction.
Step 11: For those making calculations with a spouse, check the box next to “are you married?”. This may increase the amount of social security benefit you are eligible for.
Once this information is added to the system, you can view your results.
Below the inputs, you can see a smart prompt of how long your retirement savings will last without social security. Social security can be a great option to supplement your income.
You can also view a graph of your savings under the first tab. This chart indicates the growth and longevity of your savings. Here, you can easily contrast your savings with and without social security. You can hold your mouse over any instance to get a reading of your age and savings at that point.
Next, there is a detailed table called your retirement savings balances. This table will itemize the growth of your savings and how your earnings should be distributed. All the columns in this table are fully adjustable for your convenience. If you scroll down to your retirement, you can see our suggestion for your annual distributions.
If your funds run out prematurely, you can use this calculator to adjust your retirement plan.
By making minor changes in your retirement plan, you can maximize your retirement earnings. You may want to think of adding more to your savings or reducing your expenses at retirement. You may even want to consider investments with higher returns.
Don’t forget to bookmark the social security calculator. You can save this tool on the home screen of your smartphone and return as any details change. If you found this page useful, you can promote us on social media and help others plan a happy retirement too.