How is retirement income calculated

In the meantime, please feel free to search for ways to make a difference in your community at www. Javascript must be enabled to use this site. Please enable Javascript in your browser and try again. Now Reading:. Membership My Account. Rewards for Good. Share with facebook. Share with twitter. Share with linkedin. Share using email. Updated September 23, Is Your Retirement On Track? Simply answer a few questions about your household status, salary and retirement savings, such as an IRA or k.

You can include information about supplemental retirement income such as a pension or Social Security , consider how long you intend to work and think about your expected lifestyle as a retiree. Content in calculator updated in But you have a few ways to estimate it. One way to estimate is the IRS mortality tables. At 65, for example, the average person can expect to live another 21 years. The relevant bend points for each worker are those published in the year the worker first becomes eligible for benefits age The bend points are inflation-indexed but only through age PIA is effectively locked in at age These COLAs are 0.

The COLA adjustment for was 1. For , it is 5. PIA determines the monthly Social Security benefit that will be received in the first year of benefits by a worker who starts benefits at their FRA , which is 66 for individuals born between and , increases by two months each year for those born after , and reaches 67 for those born in and thereafter.

But what about a worker who elects to receive benefits before reaching their FRA? Retiring at 62, they would receive Retiring at 63 would give them There are four ways the starting benefit can be permanently increased or reduced from the PIA calculated at age All four points are related to your starting Social Security benefits.

Keep in mind that when your benefits start, the COLA will increase them annually. If you start benefits at age 66, your PIA determined at age 62 automatically increases with the applicable COLAs from the years in which you turn 63 through If you are in your late 50s and approaching retirement, you can create a useful model of your future benefits. It works best to do this in a Microsoft Excel spreadsheet, as follows:.

You also can fill in hypothetical values for estimated taxable Social Security earnings in future years until you plan to stop working. To be conservative, use a NAWI adjustment factor of 1. A financial advisor who fully understands this process can help verify your calculations, advise you on when to start Social Security benefits, and estimate the future benefits you can expect to receive. Understanding this benefits calculation process may allow you to have increased confidence that your benefits are fairly secure, regardless of any future actions taken by Congress to deal with Social Security shortfalls.

The SSA has invested vast resources in the records, systems, and software required to perform these calculations for millions of Americans. As you can see, minimum benefits become locked in based on calculations made between the ages of 60 and When you move into that age range, you may be less vulnerable to any changes made to the system in the future. Congressional Research Service. Accessed Oct. Social Security Administration. Accessed Aug.

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And when you get your results, you can alter your retirement age to see how that affects your income. You can also see how increased contributions or taking a smaller tax-free lump sum affect your yearly pension. Call us free on or use our webchat. One of our pension specialists will be happy to answer your questions. Opening times: Monday to Friday, 9am to 5pm helpline , 9am to 6pm webchat.

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