• How Is Social Security Calculated 2017
• How Much Will Social Security Pay Me
• How Is Social Security Calculator

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If you are married, this should not include your spouse's income. When we calculate your social security benefit, if you check the married box, the total is increased to include an additional 50% of your benefit for your spouse. If your spouse will be collecting their own benefit, do no check the 'married' box. You will need to. I received an interesting question from a reader the other day regarding how Social Security benefits are calculated. He said that his wife, who is in her mid-30s, has an estimated Social Security benefit of about $2,600 per month at her full retirement of 67. The reader noted that her estimated benefit is close. A good Social Security calculator can help you get more lifetime benefits by showing you customized claiming strategies that you may not be aware of without the use of software. There are both free calculators and calculators that charge a modest fee. Nowadays, there are so many Social Security calculators that it's hard to cover them all.

Social Security is very generous—to some people. It is delivering a handsome return on investment to the generation that is now retired. It gives a bonus to workers who get married more than once. It’s kind to the low-paid.

That means certain other people don’t do so well. Here are some ways that you can wind up with the short end of the stick.

You’re a second earner. Let’s say John worked his whole life and earns a benefit of $2,500 a month. Wife Mary never worked. She gets $1,250 just for being a spouse.

Now let’s say the couple next door put more years into the workforce. Jennifer worked her whole life and gets $2,500. Her husband James worked a fair amount but only enough to earn $1,000 on his own. Instead of getting a benefit based on his own contributions, James collects the spousal benefit of $1,250.

James is getting robbed. How? Instead of getting the sum of his spousal benefit and his own benefit, he gets the higher of the two amounts.

These two couples wind up with the same payout even though the second couple chipped more money in. In effect, all the taxes that James and his employers paid go down the drain.

You have a split career. Harry works from age 26 to 46 in a private sector job, contributing to Social Security. Then from 46 to 66 he works in state government, earning a pension outside the Social Security system.

He ought to be able to collect separately from the two retirement plans. He can’t. His Social Security payout will be docked (by roughly $400 a month) on the theory that since he earned another pension he doesn’t really need Social Security.

Contrast Sam, who works in the identical private sector job from age 26 to 46 and then stays home for the next 20 years. Sam gets a higher Social Security benefit than Harry.

You have a long career. Jane worked for 35 years, at fairly high pay. Susie worked for 45 years, at lower pay. They put the same amount in. Jane gets a higher benefit.

Reason: The formula counts your 35 best years. This is portrayed as a kindness to workers. In fact what it does is transfer money from the Susies of the workforce to the Janes.

You’re single. A spouse collects 50% of a worker’s benefit (unless, of course, the spouse’s own earned benefit is larger). A one-earner couple, that is, gets 150% of the worker’s entitlement. Also, a surviving spouse inherits the full benefit.

Both of these features transfer wealth from people who don’t get married to people who do.

You’ve never divorced. Bob has married and divorced three times, each marriage lasting a decade or more. All three exes can collect the spousal benefit.

Bob’s divorce bonanza is paid for by everyone else.

You’re young. Your grandparents are taking out way more than they put in. You’ll get less than you put in.

Social Security is a Ponzi scheme, one that gives unaffordable payouts to early players using the cash collected from latecomers to the game. Ponzi schemes cannot go on forever. This one will end. Before you’re ready to collect, benefits will be cut.

You’re male. If the system were actuarially fair, men would get higher payouts. So would smokers. They don’t.

You’re well paid. Social Security combines a pension plan with wealth redistribution. If you have a fairly good salary, you will get a low return so that people who are paid less (or who work less) can get a high return.

You work past 70. If you do that, your benefit doesn’t go up, but you have to keep paying Social Security taxes. These contributions are confiscated.

There are a lot of other ways to get shortchanged by this complex system. Laurence Kotlikoff, a Boston University economist and connoisseur of Social Security’s weird rules, has assembled a long list of gotchas that cost unwary applicants thousands of dollars. The expert manning the window at a Social Security office may not warn you about a trap—may, in fact, not even know where it lies.

How Is Social Security Calculated 2017

There are ways to fight back, too. Married workers in good health can usually enhance the lifetime payout on an earnings record by waiting until age 70 to start collecting.

Two-earner couples should consider more-complicated strategies. It may make sense for a retiree to file for benefits and then immediately suspend them, or to start collecting a spousal benefit and then switch to an earned benefit, or to do just the reverse. Kotlikoff’s $40 Maximize My Social Security software is one of many advisory services aimed at helping people work the angles.

That leads us to the last way you can be shortchanged:

You rely on the Social Security Administration to tell you when to start collecting benefits.

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44 Social Security Secrets

 

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Social Security is very generous—to some people. It is delivering a handsome return on investment to the generation that is now retired. It gives a bonus to workers who get married more than once. It’s kind to the low-paid.

That means certain other people don’t do so well. Here are some ways that you can wind up with the short end of the stick.

You’re a second earner. Let’s say John worked his whole life and earns a benefit of $2,500 a month. Wife Mary never worked. She gets $1,250 just for being a spouse.

Now let’s say the couple next door put more years into the workforce. Jennifer worked her whole life and gets $2,500. Her husband James worked a fair amount but only enough to earn $1,000 on his own. Instead of getting a benefit based on his own contributions, James collects the spousal benefit of $1,250.

James is getting robbed. How? Instead of getting the sum of his spousal benefit and his own benefit, he gets the higher of the two amounts.

These two couples wind up with the same payout even though the second couple chipped more money in. In effect, all the taxes that James and his employers paid go down the drain.

You have a split career. Harry works from age 26 to 46 in a private sector job, contributing to Social Security. Then from 46 to 66 he works in state government, earning a pension outside the Social Security system.

He ought to be able to collect separately from the two retirement plans. He can’t. His Social Security payout will be docked (by roughly $400 a month) on the theory that since he earned another pension he doesn’t really need Social Security.

Contrast Sam, who works in the identical private sector job from age 26 to 46 and then stays home for the next 20 years. Sam gets a higher Social Security benefit than Harry.

How Much Will Social Security Pay Me

You have a long career. Jane worked for 35 years, at fairly high pay. Susie worked for 45 years, at lower pay. They put the same amount in. Jane gets a higher benefit.

Reason: The formula counts your 35 best years. This is portrayed as a kindness to workers. In fact what it does is transfer money from the Susies of the workforce to the Janes.

You’re single. A spouse collects 50% of a worker’s benefit (unless, of course, the spouse’s own earned benefit is larger). A one-earner couple, that is, gets 150% of the worker’s entitlement. Also, a surviving spouse inherits the full benefit.

Both of these features transfer wealth from people who don’t get married to people who do.

You’ve never divorced. Bob has married and divorced three times, each marriage lasting a decade or more. All three exes can collect the spousal benefit.

Bob’s divorce bonanza is paid for by everyone else.

You’re young. Your grandparents are taking out way more than they put in. You’ll get less than you put in.

Social Security is a Ponzi scheme, one that gives unaffordable payouts to early players using the cash collected from latecomers to the game. Ponzi schemes cannot go on forever. This one will end. Before you’re ready to collect, benefits will be cut.

How Is Social Security Calculator

You’re male. If the system were actuarially fair, men would get higher payouts. So would smokers. They don’t.

You’re well paid. Social Security combines a pension plan with wealth redistribution. If you have a fairly good salary, you will get a low return so that people who are paid less (or who work less) can get a high return.

You work past 70. If you do that, your benefit doesn’t go up, but you have to keep paying Social Security taxes. These contributions are confiscated.

There are a lot of other ways to get shortchanged by this complex system. Laurence Kotlikoff, a Boston University economist and connoisseur of Social Security’s weird rules, has assembled a long list of gotchas that cost unwary applicants thousands of dollars. The expert manning the window at a Social Security office may not warn you about a trap—may, in fact, not even know where it lies.

There are ways to fight back, too. Married workers in good health can usually enhance the lifetime payout on an earnings record by waiting until age 70 to start collecting.

Two-earner couples should consider more-complicated strategies. It may make sense for a retiree to file for benefits and then immediately suspend them, or to start collecting a spousal benefit and then switch to an earned benefit, or to do just the reverse. Kotlikoff’s $40 Maximize My Social Security software is one of many advisory services aimed at helping people work the angles.

That leads us to the last way you can be shortchanged:

You rely on the Social Security Administration to tell you when to start collecting benefits.

Related articles: