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Old 06-04-2014, 08:32 AM
 
Location: Houston/Brenham
4,121 posts, read 4,713,955 times
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I have worked for decades, and for the last 15 or so years, have hit the SS/FICA max contributions. I am now retiring, but my company wants to keep me on as a consultant, and I want the benefits, so I am inclined to take it. I will be an employee (not an independent), paid around $50K/year. I am only 58, and won't start taking SS until probably 70.

Question: Will this lower salary for possibly five or more years affect my SS benefits when I finally take them? IOW, does a lower final salary change the fact I should get the maximum benefit allowed due to hitting the FICA cap for years?

Thanks.
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Old 06-04-2014, 08:59 AM
 
Location: Northern panhandle WV
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They take the 35 highest years, so it would depend on how many years you had Made the Max or close to it. If you did not have enough HIGH paid years then yes the 50K a year would lower it some. but of course you would also be getting the 8% a year increase in benefit for each year over FRA you work too.
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Old 06-04-2014, 10:08 AM
 
Location: Houston/Brenham
4,121 posts, read 4,713,955 times
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As long as it's the 35 highest, I should be ok. Theoretically, I either have bigger years than my new salary, or these will increase it.

I've worked for almost 40 years, so I have over 35 years of SS recorded earnings.

Thanks for the info.
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Old 06-04-2014, 10:08 AM
 
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You can also look at it this way:

If you have 35 years at the maximum-social-security-contribution-amount salary then having a lower salary won't affect your earnings

If you don't have 35 years at the maximum-social-security-contribution-amount salary and don't continue working at all, $0 will be factored in to the average for each year that you don't have a salary and you would have a lower SS Benefit than if you earned $50K in those years.

If you don't have 35 years at the maximum-social-security-contribution-amount salary and in the beginning of your work history you had a salary that when adjusted for inflation would have been less than $50K today, the current $50K salary will replace those earlier smaller salaries and will increase your SS benefit.
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Old 06-04-2014, 10:34 AM
 
Location: Houston/Brenham
4,121 posts, read 4,713,955 times
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Thanks, makes sense. I need to pull one of my SS statements and see how much I made back in the stone age.
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Old 06-04-2014, 11:01 AM
 
Location: Los Angeles area
14,018 posts, read 17,772,783 times
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Quote:
Originally Posted by astrohip View Post
Thanks, makes sense. I need to pull one of my SS statements and see how much I made back in the stone age.
Remember that they index those wages for inflation before applying the formulas to determine your benefits. If that is reflected in the statement, great. If not, just be aware of it. It's been so long since I received a statement from SS that I don't even remember what they look like.
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Old 06-04-2014, 12:53 PM
 
Location: OH>IL>CO>CT
5,256 posts, read 8,442,829 times
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Quote:
Originally Posted by Escort Rider View Post
Remember that they index those wages for inflation before applying the formulas to determine your benefits. If that is reflected in the statement, great. If not, just be aware of it. It's been so long since I received a statement from SS that I don't even remember what they look like.
The Statements show actual dollars at the time (year) of earnings. I did a spreadsheet analysis of my own, using the inflation adjustment factors that SSA uses (from 0 to almost 9%). I found that a few of my earliest years (1963-1964) (31st & 32nd highest) where I earned over the max for those years ($4800 ) ($1.65/hour with lots of OT) were worth more (31st & 32nd highest) than later years (2009) with earnings of $33000 (35th highest).
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Old 06-04-2014, 01:25 PM
 
Location: Florida
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The Ssa.gov site has calculators and you can input you wages and see benefits.
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Old 06-06-2014, 06:07 PM
 
Location: Grove City, Ohio
10,144 posts, read 12,413,259 times
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Quote:
Originally Posted by astrohip View Post
Thanks, makes sense. I need to pull one of my SS statements and see how much I made back in the stone age.
Can be surprising if you look back.



Most of 1968 and all of 69 were army years. 1969 is a little misleading, I was getting $300 per month but for most of that time I was in Vietnam where I don't think I paid any taxes. I do know combat pay was tax exempt but apparently they did make me pay on my base pay.

From 1970 to 1976 I kicked around doing what I wanted to do which was flying. In 77 I got married, change careers and got serious with life. Having a wife and child to support will do that to some men.

For me the 1980's got really good to the point where I always maxed out on social security about mid summer. Always like a pay raise.

The inflation years.

I wasn't as poor as I looked. Adjusting for inflation $4,759 in 1970 would be equivalent to $29,022.99 today.

Adjusting for inflation $19,900 in 1980 would be equivalent to $57,254.04 today. Think about that in comparison to doday's world, a 32 years old high school graduate earning close to $27.50/hr and the company paid 100% of my medical benefits.
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Old 06-07-2014, 07:34 AM
 
Location: Baltimore, MD
3,746 posts, read 4,227,384 times
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Quote:
Originally Posted by astrohip View Post
I have worked for decades, and for the last 15 or so years, have hit the SS/FICA max contributions. I am now retiring, but my company wants to keep me on as a consultant, and I want the benefits, so I am inclined to take it. I will be an employee (not an independent), paid around $50K/year. I am only 58, and won't start taking SS until probably 70.

Question: Will this lower salary for possibly five or more years affect my SS benefits when I finally take them? IOW, does a lower final salary change the fact I should get the maximum benefit allowed due to hitting the FICA cap for years?

Thanks.
If you have not hit the maximum contributions for at least 35 of your earning years, you will not receive the maximum benefit.

The Social Security "estimates" are based on the underlying assumption that you will continue to earn the same annual wage as your most recently reported wage. As others have noted, Social Security indexes your wages (but only through age 59) and it is still likely that your $50,000 salary will replace a few of your years of lower earnings. Social Security Benefit Amounts

You indicate the alternative to accepting the employer's offer is retirement. If that is your only concern, then it is likely that accepting the lower wage will not reduce your benefit COMPARED to retiring. However, accepting the offer COMPARED to continuing to work at the higher income will reduce your benefit.

As noted elsewhere, you can play around with Social Security's calculator to get a better picture of how your choices will impact your final benefit.
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