9 Factors That Impact the Size of Your Social Security Check

You are currently viewing 9 Factors That Impact the Size of Your Social Security Check

Are you close to retirement and wondering how large your social security check will be each month? Estimating how much money you’ll receive from social security is an important aspect of retirement planning. After all, many retirees rely heavily on these payments and need to know how much extra cash they need to save. 

Read on to find out about several factors that affect the amount of your social security check. 

1. The Year You Were Born

The Social Security Administration sets a “full retirement age” based on your birth year. The full retirement age is a benchmark for the retirement benefits you’ll receive based on your birthday. When you’re 66 you’ll start to receive full retirement benefits.

2. Whether You Keep Working

If you continue to work after you start collecting benefits, you can increase your Social Security payment. Your benefit formula is recalculated annually to account for any new earnings. 

Working after retirement creates an exception to the rule that Social Security payments are fixed. In fact, if you earn too much and are younger than full retirement age you may lose some of your benefits. You may temporarily lower your benefit if you earn too much at work and lose some of your benefits if you are younger than full retirement age.

Hot Tip: Make sure you check the Social Security online portal – they have information about your status and benefit amounts!

3. Where You Live

If you live in one of the 11 states that tax Social Security benefits, you may have to pay state income tax on your benefit check. The federal rules do not apply in all states. The following are states in which you are required to pay taxes on Social Security taxes:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont

4. Your Age When You Claim

If you’re eligible for Social Security, you may receive retirement checks early as the year you turn 62. However, you must wait until your full retirement age (66) to obtain the maximum amount. Starting payments sooner reduces your monthly payments permanently.

If you wait even longer than 66 to start receiving Social Security checks, you can supersize your Social Security payout. This also gets permanent. Generally, for every month you withhold your Social Security claim up until 70, your monthly payout increases by eight percentage points.

5. Your earning history

Your Social Security payments are based on the amount you earned in your 35 highest-earning years. It doesn’t matter what else you were doing during those years — whether you were working as a stay-at-home parent or caretaker for a sick relative. What matters is taxable income. 

When you don’t have at least 35 years of taxable income, the remaining years are assigned $0 of income. If you are able to replace those zero years with years of income, you’ll see your monthly payment increase.

6. A Spouse Who Worked

You may be able to receive more money from Social Security if you can demonstrate that your spouse out-earned you and is now receiving a benefits check. 

If your spouse earned more than you and is now receiving a Social Security payment, you may be eligible for a partial payment of their primary insurance amount, up to half of it. You can receive a higher payout if you wait until full retirement age. 

7. The State of the Economy

Once you’re receiving Social Security payments, your fixed monthly benefit covers the expense of living. 

That said, inflation harms those on fixed incomes, so Social Security laws provide automatic cost-of-living (COLA) increases to compensate — percentage boosts to the monthly payments. Inflation is calculated based on the national rate of inflation. When inflation is flat, COLA increases are minimal or sometimes non-existent.

8. Whether You Have Other Income

Are you required to pay federal income tax on your Social Security retirement income? Possibly. If you are unmarried and unemployed, you will pay no federal income tax on your benefit checks if your income is under $25,000 for a single individual or $32,000 for a married couple filing jointly. 

If your status is anything other than single and unemployed, your benefit is taxed on a percentage of up to 50% or 85% of the total amount. Your income from other sources will determine how much you pay in taxes.

Bottom Line

The eight factors mentioned above can help you estimate the size of your social security check. This way, you can predict the monthly social security you will receive and plan for how much extra cash you need to save.