Social Security is a government program that provides financial assistance to retired or disabled individuals and their families. The amount of Social Security benefits you receive is based on your earnings over your working career.
In order to determine your potential Social Security benefit, you will need to calculate your average indexed monthly earnings (AIME). The formula is designed to provide a higher benefit to workers who have lower average earnings, as well as to those who start receiving benefits at an older age.
Let’s learn more about how social security benefits are calculated, the factors that affect them, how to estimate it to know how much social security will you receive if you make $60,000 per year, and finally some other important factors to consider.
How Social Security Benefits are Calculated?
Social Security benefits are calculated using a formula that takes into account your average indexed monthly earnings (AIME) and the number of years you have worked.
Your AIME is calculated by adjusting your past earnings to account for changes in average wages over time. The SSA uses a formula to determine your AIME based on your highest 35 years of earnings.
The number of years you have worked is used to determine your primary insurance amount (PIA), which is the amount of the benefits you are entitled to receive at your full retirement age (FRA).
What are the Factors that can affect your Social Security benefits?
Your benefits will be reduced if you start receiving them before your FRA. Your FRA is based on your date of birth and is between 66 and 67 years old for most people.
Your benefits may also be reduced if you continue to work and earn more than a certain amount while receiving Social Security. This amount is called the earnings limit and is adjusted annually.
In 2023, the earnings limit is $18,960 per year for people under full retirement age. If you earn more than this amount, your benefits will be reduced by $1 for every $2 you earn above the limit.
The maximum amount of money that the federal government will provide per month in 2023 for individuals who are eligible for benefits is $914.
For those eligible individuals who have a spouse also eligible for aid, the maximum amount is $1,371. Moreover, for an individual considered an essential person, the maximum monthly amount is $458.
How to Estimate your Social Security Benefits?
You can use the Social Security Administration’s (SSA) online retirement estimator to get an estimate of your future benefits based on your current earnings and work history.
To use the estimator, you will need to provide your Social Security number, date of birth, and information about your current and past earnings.
It’s important to note that the estimator is just an estimate and your actual benefits may differ.
How much Social Security will you receive if you make $60,000 per year?
If you make $60,000 per year, your AIME will be higher than the maximum amount that can be used to calculate your PIA, which is currently $980.
If you have reached your FRA, your benefits will be calculated using the maximum PIA, which is $3,148 per month in 2023.
If you have not yet reached your FRA, your benefits will be reduced based on the number of months you are before your FRA. The reduction is applied using a formula that is based on your FRA.
Other Important Factors to Consider
In addition to your monthly Social Security benefits, you may also be eligible for other types of benefits, such as survivor’s benefits or benefits for your spouse or children.
You may also be able to increase your Social Security benefits by delaying when you start receiving them. Your benefits will increase by a certain percentage for each year you delay starting them, up until age 70.
It’s important to consider your overall financial situation when planning for your retirement, including any other sources of income you may have, such as a pension or savings.
The amount of Social Security benefits you will receive if you make $60,000 per year will depend on your AIME, the number of years you have worked, and your FRA. You can use the SSA’s online retirement estimator to get an estimate of your future benefits.
It’s important to consider other factors, such as survivor’s benefits and the effect of delaying when you start receiving benefits when planning for your retirement.
Moreover, you should also consider your overall financial situation and your retirement planning by looking at other sources of income and savings you may have.