Things That Affect Social Security Benefits
When you reach retirement, Social Security can provide you with a supplement to your other sources of income and make your life more comfortable. When it is time to start receiving payments, the size of your payment can be affected by many different factors. If you understand how these factors work, you can maximize your Social Security monthly payment.
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Working Credits
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One thing that can affect your Social Security benefits is the amount of credits that you have accumulated. The Social Security system is based on credits that you earn while you are working. It takes a total of 40 credits to receive full retirement benefits from Social Security. Each year, you can earn a maximum of four credits, regardless of how much you earn.
Age at Retirement
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Another factor that can play into how much money you receive from Social Security is your age when you retire. You can start taking payments once you reach the age of 62. You can also wait longer. If you start taking benefits at 62, your payment will be smaller. If you wait until you reach the full retirement age, you get a bigger payment. Full retirement age varies depending on when you were born. If you were born between 1943 and 1954, your full retirement age is 62. If you were born after that date, the full retirement age increases. For instance, if you were born after 1960, your full retirement age is 67.
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Average Monthly Earnings
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When calculating your Social Security benefit, the Social Security Administration looks at how much money you made over your working lifetime. It uses a calculation known as average indexed monthly earnings. This looks at the average amount of money that you made each month while you were working. If you made a large amount compared to the average person, your benefit will be higher than if you did not make much money.
Inflation
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Another factor that plays a role in the size of your Social Security benefit is inflation. As prices go up and inflation increases, the Social Security Administration raises the benefits for those in the program. This means that the amount you receive in the future might be much higher than what current retirees are receiving from the Social Security Administration. This allows retirees to have more spending power once they reach retirement age, regardless of what the economy is doing.
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