Predicting Social Security payouts

A recent U.S. News & World Report explained how Americans can predict their Social Security payouts in order to effectively plan for retirement.

The Social Security Administration had previously sent annual statements to workers. However, it discontinued this process during 2011 in order to save money. These statements used to provide personalized estimates, based upon a worker's earning history.

While these statements are no longer available, the U.S. News & World Report provided tips for workers to calculate their amount. First, pre-retirees need to consider averages. In June 2011, the average benefit payout was $1,180.80, while the maximum for a worker retiring at age 66 was $2,366. To earn this amount, however, one would have to earn the maximum taxable amount. Using these facts as guidelines is an effective first step.

Familiarizing oneself with the Social Security formula is also helpful. Benefits are calculated based upon one's highest-earning years in the workforce and are then adjusted for inflation. Those without 35 years of earnings have zeros averaged in for the years not worked at a job that paid Social Security. Each monthly total is then split up and multiplied by certain percentages. Learning these amounts can lead to a ballpark figure for pre-retirees.

Workers also need to factor in potential retirement dates, as the earlier one retires, the lower their monthly paycheck will be.