Three Factors That Will Determine How Much Social Security You Will Receive


There are numerous misconceptions about Social Security, one of which is that the program pays the same universal benefit to all seniors. However, this is not true.

You could end up with a monthly benefit that is $1,000 greater than that of your closest retired friend or neighbor. Alternatively, your personal benefit may end up being less than the amount collected by the majority of people you know.


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It’s critical to understand the factors that go into determining Social Security benefits, all the more so because some of them are within your control. Here are a few to consider.


1. Your salary

The amount of money you earn during your career will determine the amount of money you receive from Social Security. If you earn more than someone else, you can anticipate a more generous benefit, and vice versa.

One thing to keep in mind is that each year, a wage cap is established to limit the amount of income that is taxed and counted for Social Security purposes. This ceiling is currently set at $147,000. This means that earnings above $147,000 do not count toward future benefits calculation in 2022.

However, if your salary has not yet reached the annual wage cap, increasing your income may be your ticket to increased benefits in the future. Thus, it is worthwhile to pursue promotions and raises not only for immediate gratification, but also to ensure a future Social Security benefit.


2. The duration of your employment

When calculating your monthly benefit, the Social Security Administration considers your 35 highest-paid years of employment. However, if you do not work the full 35 years, your benefit calculation will include a zero for each year of income loss.

If you’re nearing the end of your career and have only 33 years of earnings under your belt, you may want to consider extending your employment by two years. This could result in a higher benefit during retirement.


3. The age at which you make your filing

Once you reach full retirement age (FRA), you are entitled to receive your full Social Security benefit, which is calculated based on your earnings history and years in the workforce. FRA is either 66 or 67, depending on the year of your birth.

You may enroll in Social Security as early as age 62, but filing for benefits prior to FRA will reduce your benefits. On the other hand, you can elect to delay benefits beyond FRA and grow them up to age 70. As a result, you must carefully consider your filing age, as it may result in a higher or lower benefit.


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Understanding how Social Security works

Although Social Security is a complicated program, understanding how benefits are calculated may help you secure a higher monthly retirement income. It pays to educate yourself about Social Security, even if you do not intend to retire for a long period of time. The sooner you develop a strategy, the more valuable those benefits will likely be once you’re ready to begin collecting them.

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