It's always a great idea to figure out how much of a Social Security benefit you're entitled to long before you make the decision to retire.
That way you can get the big picture on how you can finance your post-career lifestyle.
But Social Security's benefits calculator is flawed -- by its own admission.
Part of the reason that the government's guestimator could be wrong is that there are many moving pieces to Social Security.
If you're married, you're entitled to a spousal benefit. If your spouse or main household income earner dies, you can claim a survivor's benefit.
There are also disability benefits, which are subject to even more complex calculations. And there are thousands of complex rules that govern how much you'll receive.
That's why when you use Social Security's benefits estimate calculator, keep in mind that these are initial estimates.
The final benefit depends upon your age, earnings history, spousal status (some divorcees can claim spousal benefits) and the kind of benefit you take.
Here's what the Social Security Administration has to say about why it' estimates could be wrong:
"Although we have tried to be as accurate as possible, this is not the same calculator as is used for official Social Security calculations and it may produce results that differ from an official calculation.
In particular, for primary benefits, we have made approximations for pre-1965 benefits and for the frozen minimum primary insurance amount, and we only partially take account of disability non-exclusion computations and the disability guarantee computation.
In addition, the calculator is not set up to estimate dependent or survivor benefits where the dependent or survivor also receives benefits based on their own record, or survivor benefits where the benefit is affected by the worker's retired worker benefit prior to death.
Based on experience to date, this calculator matches the official calculations very well, with most differences due to late posting of earnings to the earnings record, or different assumptions for projected benefits."
What You Need to Know
You should probably supplement your Social Security estimate with one from a private calculator such as Maximize My Social Security.
For a $40 fee, this tool will take into account multiple claiming scenarios (spousal, survivor's, etc.). You'll also need to know about:
- Retirement, spousal, and survivor benefits
- Child, divorcee, mother and father benefits
- Reductions for early retirement
- Re-computation of benefits
- Delayed retirement credit
- Family benefit maximum
- Windfall elimination provision
- Government pension offset
- Deeming provisions
- File and suspend & start, stop, start strategies
- Social Security's earnings test
- Adjustment of the Reduction Factor
