These rules dictate
how much you will pay into Social Security and the amount you will receive in
retirement.
How to
boost your Social Security payments
How much you earn and your
age when you sign up play a big role in how much you will receive from
Social Security. Workers who familiarize themselves with the Social Security
rules will be better able to maximize their payments. Pay close attention to
these aspects of the program when making Social Security decisions.
6.2 percent
payroll tax
Most workers pay 6.2 percent of their earnings into the Social
Security system, and employers match this amount. Self-employed workers
contribute 12.4 percent of their income to Social Security. You can see how
much you have paid in and check that your earnings have been recorded correctly
with a my
Social Security account.
$132,900
tax cap
This is the Social Security maximum taxable amount of earnings
in 2019. Earnings above the tax cap aren’t taxed by Social Security or used to
calculate retirement benefits. Workers who earn more than $132,900 in 2019 will
notice a bump in their paycheck when Social Security taxes stop being withheld.
35 years
of earnings
Your Social
Security payments are calculated using the 35 years in which you earn
the most. If you don’t work for at least 35 years, zeros are averaged in and
will reduce your retirement payments. Working for more than 35 years can
improve your payments because your lowest earning years could be dropped from
the calculation.
$1,461
average payment
Retired workers will receive an average Social Security payment
of $1,461 per month in 2019. Retired couples bring in an average of $2,448
monthly. Payments are adjusted each year to keep up with inflation as measured
by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Cost-of-living
adjustments have ranged from zero in 2010, 2011 and 2016 to 14.3
percent in 1980.
Initial
eligibility at age 62
Workers first become eligible to start retirement benefits at
age 62. However, monthly payments are reduced by 25 or 30 percent if you claim
them at this age, depending on your birth year. For example, a baby boomer who
qualifies for $1,000 per month from Social Security at age 66 would get a
reduced payment of $750 per month if he elects to sign up for Social Security
at age 62.
The baby
boomer full retirement age is 66.
People born between 1943 and 1954 are eligible to claim
unreduced Social Security benefits at age 66. The full
retirement age then gradually increases from 66 and two months for
people born in 1955 to 66 and 10 months for those with a birth year of 1959.
The full
retirement age will increase to 67.
People born in 1960 or later become eligible for the full
retirement benefit they have earned at age 67. Millennials and members of
generation X need to wait
a year longer than the baby boomers and two years longer than their
grandparents to claim their full retirement benefit.
Maximize
your monthly payments at age 70.
Social Security payments increase each month you delay starting
your payments up until age 70. After age 70 there is typically no additional
benefit to waiting to sign up for your benefit. Retirees can boost their
monthly payments by 24 to 32 percent, depending on their birth year, by
claiming Social Security at age 70.
$17,640
earnings limit
If you work and collect Social Security at the same time before
your full retirement age, part of your Social Security payments could be
temporarily withheld if you earn more than $17,640 in 2019. Beneficiaries who
exceed the earnings limit will have $1 in benefits withheld for every $2 in
income above the limit. Those who reach full retirement age in 2019 have a
higher earnings limit of $46,920, and the penalty declines to $1 withheld for
every $3 in excess of the earnings limit. However, once you turn your full
retirement age, there’s no benefit reduction for working and claiming benefits
at the same time, and your payments will be increased to give you credit for
payments that were withheld in the past.
$25,000
in retirement income
If the sum of your adjusted gross income, nontaxable interest
and half of your Social Security benefits exceeds $25,000 ($32,000 for
couples), half of your Social Security
benefit becomes subject to income tax. And if these income sources top
$34,000 ($44,000 for couples), income tax could be due on 85 percent of your
Social Security payments.
10
Social Security rules everyone should know
Paying attention to these Social Security
guidelines can help you maximize your retirement benefit:
- Most
workers contribute a 6.2 percent payroll tax.
- Earnings that exceed $132,900
in 2019 aren't taxed by Social Security.
- Thirty-five years of earnings
are factored into your Social Security benefit.
- The average Social Security
payment is $1,461 per month in 2019.
- The initial Social Security
eligibility age is 62.
- The baby boomer full retirement
age is 66.
- The full retirement age will
gradually increase to 67.
- Maximize your monthly payments
by claiming at age 70.
- There's a $17,640 earnings
limit if you claim Social Security before your full retirement age.
- Retirees who earn more than
$25,000 will pay tax on part of their Social Security benefit.
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