How Much Money Will You Get From Social Security?

Social Security benefits are a significant source of retirement income for millions of Americans. However, many people don’t fully understand how social security works, and it’s hard to understand how to maximize your benefits as you approach retirement age.

Navigating the process of gaining social security benefits is a common topic of discussion among pre-retirees as they calculate if their savings are enough to support the lifestyle they desire. After all, getting an accurate estimate of one’s social security benefits can help with determining expected income needs during retirement.

Figuring out your social security situation can seem like a daunting task, but thankfully, Landmark National Bank is here to help. In this guide, we’ll take a closer look at social security benefits, going over the basics including how much most people pay into it and how often it pays. We’ll also answer common questions you may have, such as, “How much money does social security give you?” or, “Do you pay taxes on social security?”

Understanding Social Security Benefits

Social Security is a federal program that provides financial support to retirees, disabled individuals, and families of deceased or disabled workers. Most workers pay into social security through payroll taxes, which are deducted from their wages or salary. The amount you pay into social security depends on your earnings and is capped at a certain level.

When you work, you earn “credits” toward Social Security benefits. The number of credits needed to get retirement benefits depends on when you were born. When you reach a certain age, typically 62 or older, you can begin drawing benefits. The total amount you get is determined based on your lifetime earnings and the age at which you started receiving benefits.

Calculating Social Security Benefits

The first question on most people’s minds as they near retirement is “How much social security will I get?” In short, your social security benefits are based on your lifetime earnings. The Social Security Administration (SSA) calculates your benefit amount based on your 35 highest-earning years. If you haven’t worked for 35 years, the SSA will use zero income for the missing years, which will lower your overall benefit amount. To qualify for retirement benefits, you must accumulate 40 credits, which typically requires at least ten years of work.

How Much Does Social Security Pay?

The amount of social security you’ll receive each month depends on your average indexed monthly earnings (AIME). The SSA calculates your AIME by indexing your earnings to account for inflation and then averaging your highest 35 years of earnings.

Once your AIME is determined, the SSA uses a formula to calculate your primary insurance amount (PIA), which is the amount you’ll receive at full retirement age (FRA). FRA is 66 for people born between 1943 and 1954 and gradually increases to 67 for those born in 1960 or later.

Are Social Security Benefits Taxable?

Social security benefits may be taxed depending on your overall income level. If the sum of your adjusted gross income, non-taxable interest, and half of your Social Security benefits exceeds a certain threshold, a portion of your benefits may be subject to federal income tax. The percentage of benefits that can be taxed varies from 50% to 85% depending on these income thresholds.

Is SSI Taxable?

Supplemental Security Income (SSI) is a different program from social security and is designed to provide financial assistance to low-income individuals who are disabled, blind, or over age 65. Unlike social security, SSI is a needs-based program and is not funded by payroll taxes. SSI benefits are generally not taxable, but they may reduce your eligibility for other Federal and State benefits such as food stamps and housing assistance.

Open a Savings Account With Landmark National Bank

Social security benefits are an essential component of retirement income for millions of Americans, and understanding how they work is crucial to making informed financial decisions. By paying into social security throughout your career, you can ensure a reliable stream of income in retirement. While social security benefits are not taxable, it’s essential to plan for the impact of taxes on your other sources of retirement income.

Landmark National Bank takes pride in offering an extensive range of retirement savings solutions tailored to help you achieve your financial goals. We understand that retirement planning can seem challenging, so our goal is to simplify the process and make it accessible to all. Whether you’re just starting out on your savings journey or closing in on your retirement party, we’ve got you covered!

Choosing Landmark means more than just choosing a bank; it means choosing a devoted financial ally committed to helping you secure a comfortable and stress-free retirement. Start your journey towards a financially secure and comfortable retirement by opening a savings account with Landmark National Bank today!