Social Security: Free Calculators Help You Plan Ahead for Cuts to the Program — How They Work
Despite what you might have heard, Social Security will not run out of money next decade. But under the current system, the program’s reserve trust funds are expected to be tapped out by 2035, meaning the main source of funding — payroll taxes — will cover only about 78% of the benefits in ensuing years.
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This likely means younger folks working today will see a reduction in Social Security benefits compared to what’s being paid out today. As previously reported by GOBankingRates, if you’re younger than 45, you can expect to see your Social Security benefits cut by 10% to 15% from current levels. That percentage drops to 5% for those 45 to 60 years old.
If you want to get an idea of what your monthly Social Security payment might be when you sign up for retirement benefits, the Social Security Administration offers a few tools on its website. However, these are based on current Social Security funding and don’t consider potential cuts down the road. For that, you can check out free third-party calculators.
As CNBC reported, one of those calculators is offered by Covisum, a provider of Social Security claiming software. It recently updated its calculator to reflect the Social Security trustees’ latest projections — including a free version for consumers and a more complex paid version for financial advisors.
Among other things, the free version lets you calculate the effect of a 22% reduction in benefits starting in 2035 as well as the effect of no benefit cut. This applies to various scenarios on when you plan to retire.
If you want to use the SSA’s free tools, a good first step is to create a my Social Security account online. This account lets you verify your career earnings, get your Social Security statement and access various calculators to help you plan for the future.
The calculators can help you estimate retirement benefits at age 62, full retirement age (66 or 67, depending on when you were born) and age 70. Theoretically, you could take that figure and then reduce the amount by 5% to 15% beginning in 2035.
You can also view retirement benefit estimates by:
Choosing a future age to begin receiving retirement benefits in years and months or using the “Age” scroll bar
Choosing a future date to begin receiving retirement benefits
Entering the average annual income you expect to earn until retirement
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Another option is to use the SSA Quick Calculator, which provides benefit estimates based on information you provide such as your date of birth, current-year earnings and expected retirement date.
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This article originally appeared on GOBankingRates.com: Social Security: Free Calculators Help You Plan Ahead for Cuts to the Program — How They Work
