If you are making $60,000 per year, it is okay to wonder how much you can get from social security especially after retirement. Most Americans receive social security and these funds assist them in some areas. However, knowing the amount to expect as social security can help you plan your expenses accordingly. Here is a breakdown of how much you will probably get from social security with $60,000 as your annual salary.
How does Social Security calculate your benefits?
The calculation for your Social Security benefit is based on your highest earnings in 35 years rather than just one year. The income is reviewed over these years, adjusted for inflation, and an Average Indexed Monthly Earnings (AIME) is calculated. This gives the Social Security Administration (SSA) a picture of your average earnings and helps them determine how much benefits you can get.
After figuring out your AIME, Social Security applies a formula that has what is called Bend Points as a factor towards calculating your monthly benefits. Think of bend points like the tax brackets which determine how much you pay, but in the case of Social Security, Bend Points helps to determine how much you can get from the SSA as your benefits.
How much Social Security can you expect at $60,000?
Let’s take a scenario where your lifetime earnings average out to $60,000 per year. Based on Social Security’s formula, your monthly benefits are calculated in three steps:
- You receive 90% of your first $1,115 in average monthly earnings.
- You receive 32% of any average earnings between $1,115 and $6,721.
- For earnings above $6,721, you get 15%, but if your income is $60,000, you won’t hit that threshold.
So, if you’re making $60,000 a year, your monthly benefit is likely to fall in around $2,100 if you wait until your full retirement age – which is typically 66 or 67, depending on when you were born. Keep in mind, if you decide to claim Social Security early at age 62, your benefits will be reduced, but if you wait until age 70, you could receive a larger monthly payment.
Will you pay Social Security taxes?
Yes, you’re already paying into Social Security through payroll taxes. If you make $60,000 a year, you’re contributing 6.2% of your salary, or $3,720, to Social Security. Your employer matches that amount, paying another $3,720 on your behalf. Over the course of your career, those contributions add up and help fund your future Social Security payments.
Should you rely solely on Social Security?
Even though Social Security is an important part of retirement planning, it’s not designed to replace your entire income. In fact, it’s meant to cover about 40% of your pre-retirement income, so you’ll still need other savings or investments to maintain your lifestyle once you stop working. If you’re earning $60,000 a year, Social Security might give you about $2,100 a month, but you’ll likely need more to cover all your expenses.
That’s why it’s important to save for retirement in addition to counting on Social Security. A combination of personal savings, employer – sponsored retirement plans, and your Social Security benefits will provide a more secure financial foundation for your retirement.
Maximize your benefits by knowing the best time to retire
The age you start taking your Social Security will determine the monthly amounts you will be receiving. If you claim your benefits early, say when you are 62 years, your payment will be reduced as opposed to waiting until the full retirement age of 70. On reaching the full retirement age before receiving your benefits from social security, your monthly benefits from this program will increase. It is important you think about the time you intend to retire and how this will affect what you are entitled to.
There is an official estimate of what your future monthly income from Social Security would be. You can visit the Social Security Administration’s website where you can go through their page to have a better understanding as well as plan ahead.
