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Is There A Benefit To Using A Social Security Calculator?

Social Security will be a significant portion of most American's retirement income, especially for those who don't have a pension.  Most people have some knowledge of the rules of collecting Social Security but they don't always understand the long term impact of their decision to collect early vs. later.  The decision as to when to begin collecting can be even more challenging for married couples.  Married couples should not make the decision on an individual basis but rather they should consider various filing strategies as a couple.  For all my clients that I prepare a comprehensive retirement plan, I always incorporate a Social Security maximization strategy.  I use the Social Security Calculator provided by Savvy Social Security Planning to compare social security income for married couples at various claiming ages for each spouse.  This program, available through an annual membership, has been one of the most important tools I use in my planning business.  

I was recently discussing with a good friend who is also a baby boomer and client, my plan to begin offering a Social Security Maximization Strategy Report as a stand-alone service.   She had a great question, how does your Social Security calculator and Social Security income report measure up to the calculators that people can use for free online?  I decided to answer that question by testing all the free calculators and comparing the results to the reports I provide.  Before we jump in to discussing the calculators, let’s cover the basics of Social Security.

Social Security Statements

You should have a copy of your Social Security Statement for review.  The Social Security Administration is now mailing statements to individuals age 60 and over that aren’t collecting Social Security and who don’t have a “my social security” account.  If you don’t fall into this category, I encourage you to set up your “my social security account” at https://www.ssa.gov/myaccount/statement.html.

Once you have your statement in hand, it’s important you understand the information on your statement.   On page 1 of your statement, at the top of the page, you should see “Your payment would be about $X,XXX a month at full retirement age”.  The amount shown here is your Primary Insurance Amount or PIA.  PIA is the amount you would receive if you collect your benefit at your full retirement age.  The full retirement age for individuals born between 1943 and 1954 is age 66.  If born between 1955 and 1959, your full retirement age is between 66 and 67.  Everyone born in 1960 or later has a full retirement age of 67.

On page 2 of your Social Security statement, you’ll find your estimated retirement benefits at full retirement age, at age 70 and at age 62.

Social Security Eligibility

To qualify for benefits, you earn up to four “credits” each year through your work.  (This article assumes you’ve earned enough credits and you aren’t impacted by the Windfall Elimination Provision (WEP) which applies to workers who receive a pension from employment in which they did not pay into Social Security.)  To receive Social Security retirement benefits, you need to have earned 40 credits over your lifetime.

For those who have earned their 40 credits, you can claim your Social Security benefit as early as age 62.  If you claim your benefit at age 62, the benefit will be reduced by 25% to 30% of your PIA depending on whether your full retirement age is 66 or 67.  Be careful when claiming Social Security benefits prior to your full retirement age, especially if you’re still working.   There are earning limits prior to full retirement age.  The limit in 2019 is 17,640 if you are under full retirement age.  The limit on your earnings in the year in which you reach full retirement age is $46,920, counting earnings through the month before you reach full retirement age.  If you exceed these limits, your earnings will reduce your benefit.  You may end up with a surprise bill from Social Security to pay back the benefits you received.

Social Security Calculators

Now that we've covered the basics, let's dive in to looking at some of the most popular calculators and which one you should use.

1. The Official Social Security Calculator - Social Security Administration

The Social Security website has a few calculators available for use and all are free to use.  There is the Retirement Estimator on the Social Security website (https://www.ssa.gov/benefits/retirement/estimator.html) which uses your actual earnings history and can be used for anyone not collecting a benefit based on his/her own earnings.  To use this calculator, you have to enter personal information and the Social Security Administration has to be able to confirm your identity.  When I used this calculator, I received the same figures at age 62, 67 and 70 that my Social Security statement shows.  When I selected the option to “Add a New Estimate”, I chose age 60 as my last year to work and estimated my annual earnings between now and then.  Again, the results match my Social Security statement.

Next up, I used the Quick Calculator on the Social Security website (https://www.ssa.gov/OACT/quickcalc/).  This calculator uses your date of birth, your current year earnings, the year you plan to retire and your last reported earnings to estimate your benefits.  I entered my full retirement age, 67, so I could compare these results to my statement.  The benefit projected at full retirement age using this calculator was $300 less per month than the benefit shown on my statement.  The reason for this variance is due to the fact that this calculator estimates all prior year income based on your age, current year income and last year’s income.  You’re better off having your Social Security statement or using the Retirement Estimator.

The Social Security website also offers a “Detailed Calculator” but this requires that you download the software to your computer.  I don’t want to download this calculator for a number of reasons that I won’t list.  I have my Statement, so I don’t feel the need to test this calculator.

2. AARP Social Security Calculator

The AARP has a free calculator (https://www.aarp.org/work/social-security/social-security-benefits-calculator.html) that allows you to enter your marital status, date of birth for you and your spouse if applicable, average annual salary for you and spouse, whether you worked in government (although this question does not specify that you both worked in government and weren’t covered by Social Security) and your monthly benefit at full retirement age or PIA.   When you select “see your payout”, it shows your benefit amount if you were to start collecting every year from age 62 through age 70.  The 3 figures from my Social Security statement all match the results of this calculator at age 62, 67 and 70.  If you don’t have your Social Security statement or your PIA, you can use the “Estimate Your Benefits” button.  Using this method, I found that the benefit estimator is way off compared to my Social Security Statement.  The variance and cause for the variance is similar to the distorted results from the Social Security Administration’s Quick Calculator.  Additionally, what I’d like to see from this calculator is the benefit for both me and my spouse if applicable.  If I want to use this data to evaluate our Social Security income as a couple, I would need to enter each of us separately and create an additional spreadsheet showing our combined Social Security income each year.

3. Consumer Financial Protection Bureau Social Security Calculator

The CFPB has a calculator, “Planning for Retirement” (https://www.consumerfinance.gov/consumer-tools/retirement/before-you-claim/).  This calculator is very basic.  You enter your date of birth and your highest annual work income.  Because this calculator only uses 2 variables, I would not recommend that you use this calculator for planning purposes.  If you had 1 year with high income, it will throw off the estimates.  The benefit result I received using this calculator was higher than the benefit result on my SS statement.  This calculator is too limited to use for real planning work.  Keep in mind that the actual Social Security income calculation is rather complex and too boring for me to explain to you here in detail.   The bottom line with this calculator is that it is way too simplistic and should not be used for real personal financial planning work.  If you’re very young with a long work life ahead of you and you’re curious about Social Security benefits, this is a simple tool for you to use.

4. The Center for Retirement Research at Boston College

Boston College has a “Target Your Retirement” calculator (http://squaredawayblog.bc.edu/target/).  When I hit the “launch the tool” button, I came to a screen that stated I needed to download the latest Flash Player.  You already know I’m not downloading, so I’m moving on.

5.Financial Engines Social Security Calculator

I found a link for Financial Engines Social Security Retirement Calculator, https://financialengines.com/education-center/social-security-planner/. When I clicked the link, I found a quiz on Social Security featuring 8 questions related to Social Security benefits.  I took the quiz and found that I and only 27% of the respondents answered more than 6 questions correctly.  I did not find a calculator after completing the quiz.  Even after I clicked calculators in their site menu, and then clicked Social Security Planner, I was brought back to the 8 question quiz.

6. Bank Rate Social Security Calculator

This is another basic calculator that makes a lot of assumptions behind the scenes (https://www.bankrate.com/calculators/retirement/social-security-benefits-calculator.aspx).  The inputs for this calculator are current age, age of retirement, annual income, expected salary increase and expected rate of inflation.  You can also check a box for married.  I entered the data points and used 2% inflation and age 67, my full retirement age, so that I could compare the results to my statement.   With these variables and 0% salary increase, 3% salary increase and married vs. not for both these salary increases, the results ranged from $2200 to $3300 to $5000 at full retirement age.   These figures are way off from my PIA on my SS statement.

7. Savvy Social Security Planning Tool

As I mentioned above, the Savvy Social Security Planning Tool is available to financial professionals with a paid annual membership.  Of all the tools and software programs I use in my planning business, this program ranks in the top 1-2.  My membership gives me access to the Social Security calculators which I use for nearly all of my clients.  The calculators give me the ability to show the client what each spouse’s Social Security benefit would be based on the date that each of them begins collecting their benefit.  My intent with this calculator is three fold.  First I want to review the couple’s various claiming strategies and focus on the strategy that maximizes their combined Social Security Income and survivor income.  See the Comparison of Scenarios as an example of the information I have on spousal Social Security benefits.


Next I want to input these income strategies into their overall financial plan to determine which strategy fits in best with their plan.  One of the factors within their plan that will impact my recommendation on benefit begin dates is, do they have pension income in addition to Social Security income.  I also look at how much they have saved in retirement, investment and savings accounts that they can draw from and hold off on collecting Social Security for as long as possible.  The more income / retirement account assets available to a client will allow the client to delay collecting Social Security to allow their benefit to grow by the current 8% per year until age 70.  Lastly, the most important factor impacting their complete retirement plan is their spending levels from now through their life expectancy.

When I discuss Social Security with my clients in our initial meeting, I usually get one of two responses on their thoughts on when they plan on collecting.  They either want to collect as soon as possible or wait until age 70 when their benefit is maximized.  What I find when I work through their comprehensive plan is that waiting until age 70 isn’t always the best option, if that means spending down all their retirement assets until they turn 70 and start collecting.

According to the Social Security Administration, over 95 percent of Americans aged 60 to aged 89 will receive Social Security benefits.  And, since 1970, the number of women eligible for their own benefit has increased from 63% to 86%.  This statistic makes coordinating your benefits as a couple more important today than it was for your parents or grandparents.

Because the decision to collect benefits will impact one’s finances for the rest of their lives, the decision as to when to collect should not be taken lightly.  Get your Social Security statement, understand your options, coordinate benefits and choose carefully!

You can find a sample customized social security report here Social Security Spousal Planning Analysis.

Contact me today to receive your customized social security spousal analysis report.