"Your Social Security Statement" is an annual update on how much you're entitled to in the way of benefits. The Social Security Administration begins mailing this early in your working life. It's a very useful document and a great aid in financial planning. The agency also periodically produces sample benefit calculations that help people understand how much of their retirement needs will be covered by Social Security.
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A recent set of illustrations from the agency reflects what it calls a "full-lifetime average earnings level"—a person's highest 35 years of earnings, indexed for wage inflation, with the assumption that they survive to at least the age of 65 without becoming disabled. Its samples use full-lifetime averages of $10,000, $20,000, $30,000, $40,000, $50,000, $60,000, and what it calls the "steady maximum" employee, who began working at the age of 22 and earned at least the maximum amount of earnings each year on which Social Security taxes are due (actually, they're called Old Age Survivor and Disability Income taxes).
Then, the agency provides benefits for various age levels and provides annual benefits for these people, which are tied to the various lifetime earnings averages. While people nearing retirement have a good idea of their lifetime earnings, younger workers do not. These illustrations can provide them useful looks at possible benefit levels.
Because Social Security benefits are indexed for inflation, it's appropriate to look at current price levels and spending needs to determine how much of your future spending needs would be covered by Social Security. For example, if the benefits shown below covered 40 percent of your current spending needs, it's not a stretch to figure that they also would equal about 40 percent of your future spending needs. You need to do some adjusting for a different retirement spending profile. Even with Medicare, your medical expenses might be higher. Your housing expenses might be lower if you've paid down your mortgage. Some experts say you can live on less—70 to 80 percent of your income at retirement is a popular range. A more prudent suggestion is to assume your retirement spending will be 100 percent of its earlier level. If you're wrong, enjoy the windfall!
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Social Security Benefits
These examples begin with a person's age in 2009 and the benefits they are entitled to when they reach what is called their full retirement age (FRA). For most people, this is 66 or 67 years of age, although some experts support raising the FRA to help reduce projected Social Security deficits and also to acknowledge longer working careers and lifespans. The "Pct" row provides the percentage of fully insured workers in each earnings group.
|
Age |
Annual Social Security Benefit at Various Full-Lifetime Earnings |
||||||
|
|
$10,000 |
$20,000 |
$30,000 |
$40,000 |
$50,000 |
$60,000 |
Maximum |
|
25 |
$8,532 |
$11,724 |
$14,928 |
$18,132 |
$21,324 |
$23,760 |
$30,060 |
|
35 |
$8,532 |
$11,724 |
$14,928 |
$18,132 |
$21,324 |
$23,760 |
$30,108 |
|
45 |
$8,532 |
$11,724 |
$14,928 |
$18,132 |
$21,324 |
$23,760 |
$30,132 |
|
55 |
$8,532 |
$11,724 |
$14,928 |
$18,132 |
$21,324 |
$23,760 |
$30,000 |
|
65 |
$8,172 |
$11,232 |
$14,304 |
$17,376 |
$20,448 |
$22,752 |
$28,140 |
|
Pct. |
11 |
15 |
16 |
15 |
12 |
10 |
21 |
Survivorship Benefits
The age column refers to both the age of the deceased spouse in 2009 and the age of the surviving spouse in 2009. The lifetime earnings refers to the deceased spouse's earnings. It is assumed that the deceased spouse died in 2009. Example (1) is for a spouse and one child; example (2) is for one child only; example (3) is for the surviving spouse and two children.
|
Age |
Annual Survivorship Benefits at Various Full-Lifetime Earnings |
||||||
|
|
$10,000 |
$20,000 |
$30,000 |
$40,000 |
$50,000 |
$60,000 |
Maximum |
|
25 |
|
|
|
|
|
|
|
|
(1) |
$7,056 |
$12,792 |
15,312 |
17,808 |
20,328 |
22,848 |
44,016 |
|
(2) |
3,528 |
6,396 |
7,656 |
8,904 |
10,164 |
11,424 |
22,008 |
|
(3) |
7,056 |
12,792 |
15,312 |
18,420 |
22,980 |
27,540 |
51,384 |
|
35 |
|
|
|
|
|
|
|
|
(1) |
11,568 |
15,984 |
20,112 |
24,240 |
28,344 |
32,472 |
44,016 |
|
(2) |
5,784 |
7,992 |
10,056 |
12,120 |
14,172 |
16,236 |
22,008 |
|
(3) |
11,580 |
15,996 |
22,572 |
30,048 |
34,140 |
37,896 |
51,360 |
|
45 |
|
|
|
|
|
|
|
|
(1) |
12,288 |
16,824 |
21,360 |
25,896 |
30,432 |
34,224 |
43,824 |
|
(2) |
6,144 |
8,412 |
10,680 |
12,948 |
15,216 |
17,112 |
21,912 |
|
(3) |
12,288 |
16,838 |
24,852 |
31,956 |
36,012 |
39,960 |
51,156 |
|
60 |
|
|
|
|
|
|
|
|
(1) |
5,940 |
8,184 |
10,428 |
12,672 |
14,916 |
16,548 |
20,292 |
|
(2) |
6,228 |
8,592 |
10,944 |
13,296 |
15,648 |
17,364 |
21,288 |
|
(3) |
12,468 |
17,244 |
25,788 |
32,568 |
36,780 |
40,524 |
49,692 |
|
Pct. |
12 |
15 |
16 |
14 |
13 |
9 |
21 |
There seems to be an immutable Social Security law: the more you say about Social Security, the more questions people have. Please fire away. I'll get answers from Social Security and report on them in a future Best Life.
[See Your Guide to Social Security, Part One.]
[See Your Guide to Social Security, Part Two.]
[See Your Guide to Social Security, Part Three.]
Reader Comments Read all comments (6)
Doug McLeod of WI 12:33PM April 07, 2010
Dean of NM 11:37AM April 07, 2010
tom of WI 7:26AM April 07, 2010