Social Security is the main source of income for many retirees. During your time in the workforce, you pay into the system through payroll taxes which allow you to receive guaranteed lifetime benefits once you retire. It’s important to think through how much Social Security income you can expect so you know how much to budget for retirement. Read on to learn how to estimate your monthly Social Security income.
Know the average Social Security payment
The average Social Security benefit is around $1,543 per month. The maximum Social Security benefit is $3,148. To earn this amount, a person would need to earn the maximum taxable amount, ie $142,800, over a 35-year career to get this Social Security payment.
Factor in your Social Security retirement age
The age you start Social Security plays a huge role in your payment amount. Your monthly Social Security amount is reduced when you claim payments before your full retirement age. You could increase your monthly payments for each month you delay claiming your amount between your full retirement age and age 70.
Remember income tax withholding
Most retirees have to pay income tax on their Social Security payments if they have other sources of retirement income. So, if Social Security is your only source of income, you’ll pay no taxes on it. But, if you have other sources of income, such as IRA withdrawals, a pension, part-time work, interest, and dividends, then you’ll need to pay tax.