February 27, 2020

Edited 08/11/20

3 Real-Life Social Security Benefits Examples

We calculated 3 real-life example of Social Security benefits based on personal finances, marital status, and age.

Throughout your career, you have been paying into the Social Security system. Recent estimates have shown that on average you and your employer have contributed more than $200,000 into the system for the average worker. As you approach your retirement years, you will soon begin to receive the contributions back in the form of monthly income. Let’s take a look at how Social Security calculates these benefits and three real-life examples of what you can expect to receive.

How does SSA calculate benefits:

The Social Security Administration (SSA) uses a multi-step process to calculate your benefits. This calculation can be done by an individual, but it is complex and time-consuming. 

SSA calculates your benefits by reviewing your lifetime earnings and adjusting it to the National Average Wage Index (NAWI) for each year. Then, SSA calculates your Average Indexed Monthly Earnings (AIME) based on the highest amount earned throughout your lifetime. After that, a formula is applied to convert your AIME into a Primary Insurance Amount or PIA. Then, your PIA gets adjusted to any Cost of Living Adjustments also known as COLA. On top of this, SSA will reduce your benefits if you claim them before your “full retirement age” (FRA) which is between 66 and 67 years old for most Americans.

As you can see, this calculation can get very complicated very quickly which is the main reason people look for other ways to estimate their Social Security benefit. 

3 Real-Life Examples of Benefits

Social Security benefits are based on how much he or she earned through 35 years of working. Below are three real-life examples ranging in income, marital status, and retirement age. 

Get an idea of how much you can expect to receive from Social Security with these three scenarios. *Please note that these are benefit estimates. Your individual situation will be based on your age, income and other factors. 

Meet Jim:

Jim is 56, single, and has never been married. He is currently earning $85,000 per year and has $150,000 saved for retirement to cover taxes, medical expenses, and unexpected financial situations. Jim will be relying on his benefits to pay for his living expenses. His estimated benefits vary depending on when he elects to take them:

  • Estimated benefits if Jim selects early benefits at age 62: $20,059 annually
  • Estimated benefits at full retirement age (FRA) of 67: $28,655 annually
  • Estimated benefits if Jim delays to age 70: $35,532 annually

It would be advisable for Jim to work as long as possible or collect at age 70 to receive maximum benefits. 

Meet Jason and Tonya:

Jason and Tonya are ages 58 and 54 respectively, and they are married. Jason currently earns $125,000 per year while Tonya has never earned a wage and therefore has not contributed to Social Security. Tonya will receive spousal benefits equal to half of Jason’s benefits at her FRA. They have approximately $350,000 in retirement savings that they can use for their living expenses. They are exceptionally healthy and expect to live into their 90’s. If Jason takes his benefits at his FRA of 67, their annual benefits would amount to:

  • Estimated benefits at FRA for Jason: $37,255 annually
  • Estimated spousal benefit at FRA for Tonya: $18,627 annually
  • Household total: $55,882 annually 

However, if Jason and Tonya delay their benefits until age 70, their annual benefit amounts would increase to:

  • Estimated benefits if Jason delays to age 70: $46,196 annually
  • Estimated spousal benefits at FRA for Tonya: $23,098 annually
  • Household total: $69,294 annually

Since they have the resources to meet their needs during the early part of retirement, waiting until age 70 may be the most financially beneficial move.

Meet Alex and Victoria:

Alex and Victoria are both 60 years old. Alex is currently earning $75,000 per year while his spouse, Victoria, earns $100,000. Their household income is $175,000 per year. They currently have $500,000 in retirement savings for unexpected financial situations and long-term health needs. The couple plan to use their Social Security benefits to maintain their lifestyle. They both plan to retire together at their FRA of 67. 

  • Estimated benefits at FRA for Alex: $24,452 annually
  • Estimated benefits at FRA for Victoria: $29,775 annually
  • Household total: $54,227 annually

If Alex and Victoria delay their benefits until age 70, their benefits increase to:

  • Estimated benefits at age 70 for Alex: $30,320 annually
  • Estimated benefits at age 70 for Victoria: $36,921 annually
  • Household total: $67,241 annually 

Alex and Victoria should consider taking their benefits at their FRA of 67 to minimize their portfolio withdrawals and allow it to grow.

3 Ways to Estimate Your Social Security Benefits 

There are multiple ways to obtain an estimate of your Social Security benefits:

  1. Receive an estimate of your benefits by visiting the Social Security Administration’s website at SSA.gov. Here, you will be able to create an account and use one of its online benefit calculators to estimate your benefit based on your earnings record. 
  2. Use one of the many calculators that are available online from a variety of sources. Typically, financial institutions that work with retirees will have some version of a calculator that can be used to estimate your benefits. These calculators can vary in their results, so it’s best to compare several calculators to the results provided by the SSA. Calculate your benefits using Silvur’s Social Security benefits calculator or download Silvur to see your future income with your net worth.
  3. Visit a local Social Security office to review your past earnings and get a calculation of your expected benefit. This option is a little more challenging as it requires the use of your time to schedule an appointment and travel to the SSA office. The benefit of this is you can review your work record for accuracy and will be able to ask questions about the estimated benefit.

The SSA invests a lot of resources into recordkeeping, systems, and software required to perform these calculations for millions of Americans. Therefore, you should feel confident with the estimates generated by the SSA. Social Security is a major part of almost every working American’s retirement plan. Understanding the best way to estimate your benefits is critical to planning for a successful retirement.