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I noticed that over the past year or two, the estimated Social Security benefit (when I log onto my SS account on the official website) seems to change every couple of months. Why does it fluctuate so often? I thought it would only be changed once a year.....apparently not.
Right now I'm 32 years old but I look at my estimated SS benefit every month just to monitor things. For most of mid 2016, they estimated it to be $2,244 per month. Then, around November, it went up to $2,295 and stayed that way for the past two months, until I checked yesterday, when it DROPPED down to $1,940
WHY does this happen? I thought that they collect and store earnings data once a year for each person. Why does it change every couple of months? It's just so...erratic and makes it harder to plan for retirement.
In 2016, I was employed from March 28th and for the rest of the year, and I'm still employed since then as of today. Prior to March 28, 2016, I was unemployed since September 17th, 2015. I don't know if this matters though. When employed, I was always a W-2 employee.
I believe the algorithm is to project the previous year's reported earnings as the value for all future years. So if the previous year's earnings were low, or in the case of multiple employers, perhaps one has not yet reported 2016 earnings and one has (causing an artificially low earnings report), the projection would be way off.
Best thing to do is to enter the yearly data yourself with projected future earnings:
At your age one lean year could account for that difference. By the time you are 66 a lean year (or fat one) will make little difference due to the number of work history quarters you will have under your belt.
Right now I'm 32 years old but I look at my estimated SS benefit every month just to monitor things.
Checking the SS website monthly is a complete waste of your time and effort. You're at least 30 years away from collecting (unless you become disabled), and who knows how much you'll earn over those years, or how the SS program will be tweaked during that time. The "estimates" you are seeing are therefore best regarded as total fantasy.
Better to forget about the SS website until you are a LOT closer to retirement, and concentrate on monitoring your spending patterns and savings rate instead. Those are things YOU control.
Oh I just looked on the earnings history on the SSA website and apparently, because it's a new year, they received my 2016 W-2 and updated the estimated benefit. However, because my W-2 earnings in 2016 were significantly less than in prior years, due to being unemployed for a couple months during 2016, it dragged down the overall benefit. I have a total of 17 years on my earnings record, which isn't a whole lot.
Phew! I thought something was mess up!
With that said, I think I will now increase my 401k contribution rate from 17% to 20% in order to make up for all those lost SS wages during my unemployed months! I can easily afford do it!
Oh I just looked on the earnings history on the SSA website and apparently, because it's a new year, they received my 2016 W-2 and updated the estimated benefit. However, because my W-2 earnings in 2016 were significantly less than in prior years, due to being unemployed for a couple months during 2016, it dragged down the overall benefit. I have a total of 17 years on my earnings record, which isn't a whole lot.
Phew! I thought something was mess up!
With that said, I think I will now increase my 401k contribution rate from 17% to 20% in order to make up for all those lost SS wages during my unemployed months! I can easily afford do it!
Go ahead and up your 401K if you want to. But be aware that a few lostmonths will be no more than a "rounding off" error when SSA calculates your average earnings over the "highest 35 years" (or 420 months) to arrive at your eventual benefit (All this assumes, as others have said, that the rules aren't changed drastically in the future)
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Go ahead and up your 401K if you want to. But be aware that a few lostmonths will be no more than a "rounding off" error when SSA calculates your average earnings over the "highest 35 years" (or 420 months) to arrive at your eventual benefit (All this assumes, as others have said, that the rules aren't changed drastically in the future)
Social Security is based on calendar year earnings, not months. You could get all your income in a December 31 bonus check every year and it would be the same outcome.
Personally, I don't see how the "rules" can ever change. 70% of the labor force is going to hit their mid-60's with very low net worth and that percentage is increasing, not decreasing. Once they hit that event where they can't work, most will plunge into poverty without the Social Security system.
OP: do yourself a favor, and take advantage of your low income tax years and contribute to a Roth (after taking the company match in a 401k of course) Long after I'm dead, you will thank me! If you have access to a high deductible HSA, max that out too and don't use it.
OP: do yourself a favor, and take advantage of your low income tax years and contribute to a Roth (after taking the company match in a 401k of course) Long after I'm dead, you will thank me! If you have access to a high deductible HSA, max that out too and don't use it.
I don't like Roths at all. I used to have a Roth IRA and didn't like the concept at all, In the end, I dissolved it and switched back to a traditional 401k through my employer, because I like the tax deferred growth potential that simply isn't offered by a Roth.
My company doesn't offer 401k matching at all. It's all on me.
My company offers high deductible HSA's, but it would be a terrible choice for me. I see doctors about 30 times a year, so I have a real health insurance plan.
I don't like Roths at all. I used to have a Roth IRA and didn't like the concept at all, In the end, I dissolved it and switched back to a traditional 401k through my employer, because I like the tax deferred growth potential that simply isn't offered by a Roth.
That makes no sense. Money invested in either type of IRA has exactly the same tax-free growth potential. Where they differ is at what point taxes are paid: with the Roth, you invest after-tax money and later withdrawals are tax-free, while with a traditional IRA you invest using pre-tax money and then owe tax on withdrawals. Oh, and with a traditional IRA the government forces you to begin withdrawing money at age 70 1/2 and requires a minimum withdrawal amount that increases with your age, while with a Roth there's no requirement to ever withdraw the money, so you can choose the timing and the amount of the withdrawals to suit your own needs. It's a valuable thing to have a significant amount of your retirement savings in a Roth!
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