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Now don't jump on me. I'm fully aware that working more years ups the SS payout, but that is based on the actuary's calculation that they will be paying you SS benefits for fewer years. In this case, here's my question. Lets say that you had some interruptions in your working career, and did not work full time or you just didn't make a lot of money some years. So you have 35 years of work history, but during some of those you worked little or none. So, does upping the number of years worked full time, making good money, have a meaningful effect on increasing the SS benefit? Lets say you added 3 years of working full time vs. 3 years of working part time minimum wage jobs during college.
Not to hijack but I'm curious how ss is impacted on someone who was a high earner up until say age 40 and then became self employed and didn't take a salary for say 10 years.
Wonderong what that persons SS impact is and what they would need to do to over the next 15 yrs or so maximize their ss benefits (if ss is still there!)
Social Security is based on a formula using your average social security taxed wages over your working career. They look at 40 years of your wage history and throw out the lowest 5 years. So, essentially, they are using your top 35 years of social security taxed wages. These top 35 years are recalculated into today's dollars and a complicated formula is applied. You can read about it here:
But, basically, to answer your question: if you have low wages in any of the 35 years and you can earn a higher amount (higher meaning higher than the indexed-to-today's-dollars lower wages) you will get a bigger monthly benefit. However, you have to realize that this formula uses an average of 35 years, so increasing a few years will not necessarily increase your benefit by a huge amount. And based upon your age and whether or not you are currently receiving Social Security benefits, you may have some of your current benefit withheld.
Now don't jump on me. I'm fully aware that working more years ups the SS payout, but that is based on the actuary's calculation that they will be paying you SS benefits for fewer years. In this case, here's my question. Lets say that you had some interruptions in your working career, and did not work full time or you just didn't make a lot of money some years. So you have 35 years of work history, but during some of those you worked little or none. So, does upping the number of years worked full time, making good money, have a meaningful effect on increasing the SS benefit? Lets say you added 3 years of working full time vs. 3 years of working part time minimum wage jobs during college.
Yes, it can make a difference but there is a law of diminishing returns and your previous wages are applied to a inflation index. You use the term good money and that is ambiguous. Are you maxed out over the SS cap contributing the max possible? That can make a difference. There are SS calculators available that you can change the variables with and see how it plays out for YOU. I used the guideline of having 35 plus years in a professional full time career and not using any work history prior to that. Continuing to work was not going to up my benefit very much based on my work history after the 35.
Now don't jump on me. I'm fully aware that working more years ups the SS payout, but that is based on the actuary's calculation that they will be paying you SS benefits for fewer years.
No, it's not. In fact, that is totally irrelevant to the computation.
I'll give you a hypothetical example, and to keep it very simple to show that the point above is irrelevant, we'll assume a set salary for someone's entire working career: Person A works a total of 30 years making $xx,xxx and then retires @ 62 while Person B works 35 years making the same $xx,xxx and also retires at 62. Person B's benefit will be greater that Person A's because Person A's computation will include five years of no income in the benefit formula. Social Security benefits are based on a person's highest 35 years of earnings.
Since both Person A and Person B begin drawing benefits at age 62, they would both be expected to draw for the same number of years (actuarily speaking). Consequently, your conclusion above is false.
I guess I didn't explain myself well. What I was referring to MMB, was the fact that your benefit goes up every year after 62 until you reach 70. I think the number is that if you retire at 62, you'll get 30% or so less than if you retire at 66.
I asked this question before but frankly don't remember the answer. So I'll do a small hijack of my own.
I'm 54 and have income dating back 35 years. My statement gives a figure with the caveat "if you continue to work at your current income your benifit will be: X. As I continue to work my benefit goes up as I'm obviously replacing low income years from in my younger days.
But my question is if I lose my job tomorrow and do now work again will my benefits go down from the figures on my statement?
Your figures should not decrease because you have the 35 years that Social Security is going to use in their calculations. They are not going to replace years where you earned income with years that you didn't earn income. Notice, it is not 35 consecutive years... it is 35 total years of income
Your figures should not decrease because you have the 35 years that Social Security is going to use in their calculations. They are not going to replace years where you earned income with years that you didn't earn income. Notice, it is not 35 consecutive years... it is 35 total years of income
Even more specifically it is the highest 35 years of earnings
I asked this question before but frankly don't remember the answer. So I'll do a small hijack of my own.
I'm 54 and have income dating back 35 years. My statement gives a figure with the caveat "if you continue to work at your current income your benifit will be: X. As I continue to work my benefit goes up as I'm obviously replacing low income years from in my younger days.
But my question is if I lose my job tomorrow and do now work again will my benefits go down from the figures on my statement?
Possibly. Just as you quoted, the projections assume you'll continue working at your current income and plug that figure into every future year used in the projection, perhaps replacing some lower-income years in your history.
Using the SSA website calculator, plug in 0 (zero) dollars for every year between now and when you plan to start drawing SS. That way you'll get a more realistic estimate of your benefit should you quit work tomorrow.
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Highest 35....
