Trying to understand how Social Security will meet your needs down the road is a lot like looking into a crystal ball — lots of foggy prognostications about the future, but few concrete certainties.
Fortunately, there’s a free online calculator from AARP that can provide numerical projections to suggest how far your money is likely to stretch in retirement.
A look at AARP’s interactive Social Security calculator
We know AARP can be a divisive organization depending on your political persuasion, but hear us out on this one…
The AARP offers a robust free Social Security calculator that will estimate your benefit and show you how it stacks up against your likely living expenses in retirement.
Anyone can use this tool at any age — you don’t have to be 50 like you do to join AARP. In fact, there’s nothing to sign up for or subscribe to in order to use this free tool. You’re never even asked to enter your email!
We took the calculator for a spin and we’ll show you what you can expect when you log on…
Step 1: Just the facts, ma’am (or sir)
After a brief introduction page, this is the first screen where you have to input info to get the most accurate projection tailored to your situation:
Be prepared to enter your marital status, date of birth, government employment status, annual average salary and projected monthly Social Security benefit at full retirement age.
Not sure what to enter for that latter category? No worries! The ‘Estimate Your Benefits’ button that AARP provides right in the tool is very helpful and does exactly what it promises.
The estimate will be accurate within a few hundred dollars. However, if you want a more definitive sense of what your projected monthly Social Security benefit will be at full retirement age, you can get that directly from the Social Security Administration when you set up a free my Social Security account.
(Editor’s note: If you have a credit freeze in place, you’ll need to temporarily thaw it in order to sign up for your Social Security account. Fortunately, that’s now free to do across the country, too.)
Step 2: Good things come to those who wait
Any time the topic of Social Security is mentioned, there’s a vigorous debate about the “right” age to collect benefits.
The earliest you can start collecting is 62. But for every year you wait, your benefit grows. However, once you hit 70 your benefit will not grow anymore.
In case you’re curious, money expert Clark Howard will be waiting until he’s 70 to claim his benefit. And he’s long advised others to do the same, if possible.
Yet there are several circumstances where even Clark admits it makes sense to collect as early as you can at age 62.
So, there’s really no “right” answer here!
But as a general rule, Clark’s advice about waiting is right on the money because the numbers don’t lie. In one hypothetical we ran on the AARP tool, you’d get almost twice as much each month by delaying to age 70 versus collecting your check as soon as you can at 62:
Step 3: Running the numbers
One of the nice things about the AARP calculator is that it projects what percent of your living expenses will be covered by Social Security based on whatever age you choose to claim your benefits.
Remember, the earlier you claim benefits, the less you should expect your monthly expenses to be covered by Social Security.
We ran two different scenarios on either end of the age spread, though keep in mind that you can use the slider in this AARP to customize the year to your liking.
Here’s what we found…
|Claiming at 62||Claiming at 70|
The upshot of it is this: In this scenario, if you choose to claim at 62 — the earliest possible year you can collect — your monthly Social Security check would only cover half of your month expenses. But if you elect to wait until 70 — the point at which your benefit will no longer grow — you’ll be able to cover nearly 100% of your monthly expenses on Social Security alone.
That’s the power of waiting to collect Social Security!
By the way, the estimated monthly expenses you see are pulled in from the Bureau of Labor Statistics’ latest Consumer Price Index.
Meanwhile, the AARP calculator also lets you run projections in the event you claim benefits before your full retirement age and still keep working.
In 2018, you’re allowed to earn up to $17,040 while still receiving Social Security before full retirement age without getting any money withheld from your benefit.
If you go over that earnings limit, then Social Security will withhold $1 in benefits for every $2 you earn over $17,040 in 2018.
Fortunately, the money that is withheld gets returned to you after you reach your full retirement age, as illustrated in the chart below:
Step 4: Bringing it all together
OK, so you’ve been through the bulk of the calculator by now and learned a lot along the way. The final steps ties it altogether with a couple more detailed number projections.
Here, in the final screen of the calculator, you can get a sense of what your lifetime payout of Social Security benefits could look like — the number might surprise you — and a sense of exactly how much your benefit will grow every year for as long as you can hold off taking it!
Final thoughts on AARP’s interactive Social Security calculator
This tool offers a great free way to get a glimpse into what your financial future could look like — no crystal ball necessary!
We particularly like the integration of the monthly expenses into the calculations. While these numbers will only rise over time, they at least give you a starting point to understand how much of your day-to-day will be covered by Social Security.
That’s very important when you consider that more than four out of 10 older people rely on Social Security for 90% or more of their monthly income.
The average monthly Social Security checks for a retired worker stands at $1,413, according to the latest numbers.
Meanwhile, if you know there’s no way you could live on $1,413 a month, then it may be time to start saving more diligently than you have in the past.