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Well at least now I know how I missed it. It wasn’t there. The mistake I made was compounding it monthly on the calculator, which it isn’t. It is compounded yearly.
It is not a higher compounded rate but the dollar amount that rate translates into. The power of a compounding COLA. My pension compounding COLA kicks in soon and it is over 2%. Sweet pension keeps growing and with the recent SS increase and the tax cut, gotta day Bada Boom.
At age 70 this is sweet
I'm missing something with the 'compounding advantage'. If your Social Security check is $1,000 and my Social Security check is $2,000, my check is always going to be 2x yours every year.
no it is not ... cola is compounding . first year cola on 2k if it is 2% is 400 dollars , so you have 2400
next years cola is 2% so you have a 480 adder . now you get 2880.00
if my check is 4k , 2% cola is 800 so i have 4800 . if next year is 2% then i get 960 added .
i am getting 5760 to your 2880 . i was 2k higher , now i am 2880 higher .
It's still exactly twice as much. No matter the rate, no matter the number of compounding periods, it remains twice as much. The incremental increases are all exactly twice as much. The cumulative totals are all exactly twice as much.
I turned age 64 recently (retired and hence not working at present but rather living off of my assets and not yet collecting any SS benefits thus far) but figured I will choose to (a) go back to working full-time and, at the same time, (b) start collecting my Social Security benefits now. So I'd be earning full-time income and getting an SS check each month (though at a somewhat-reduced amount for working while collecting before having reached what the SSA deems my "full retirement age" of 66) . . . and then, when I'd reach age 66, there is no penalty for working while collecting your SS benefits and I'd continue working up to age 70 and working after age 70 is optional (whether full-time or part-time or flexitime).
YET the Social Security Administration talked me OUT of starting to take my SS benefit now with my turning age 64. For they said that, if working while collecting SS prior to my turning age 66, I'd have to limit my earnings to no more than $17K/year or else I'd be penalized and, if I did so more than twice in a relatively short time frame, they'd kick me off of SS until after age 66 and I'd owe some money back to them. Well, in my state-of-residence, the minimum wage is presently $11.00/hour . . . . . . so $11.00//hour x 40 hours per week x 52 weeks per year equals $22,880.00/year. So $17K per year or less (to be required by the SSA to limit your income to) is much less than even working full-time for minimum wage (i.e., over $5000.00 less per year than even the minimum wage level of $22,880/year). That seems ridiculous for me to choose to limit myself to earning less than $17K per year just so that I can collect SS benefits at the same time.
So, in summary, unless someone in this thread can advise me otherwise, I will just start working full-time again (but without starting to collect SS at the same time) in order to keep paying into the SS system to boost my SS benefit level more-and-more and will start collecting SS at age 66 but while continuing to work full-time through at least age 70. Hence, by working full-time from now (at age 64) through at least age 70 (if not beyond age 70 to whatever degree), I can try to make up for the past number of years of not working and hence not paying into the SS system but just living off of my assets.
It's still exactly twice as much. No matter the rate, no matter the number of compounding periods, it remains twice as much. The incremental increases are all exactly twice as much. The cumulative totals are all exactly twice as much.
2k a month is 24k a year . so a 2% cola is 480 a year ... so year one you have 24 ,480.00 . year two you have 24480 plus another 489.60 or 24,969.
4k a month is 48k a year so the cola is 960. that is 48960, year two you get another 2% so now you get 979.20 and have 49,939.00
so yeah the relationship is 2:1 but the dollar difference is growing more apart .
it was 48k vs 24k , that is a 24k difference . now it is 24,969 vs 49,939 , that is a 24,970 difference . each year the relationship stays the same but the dollars difference grow .
you are trying to look at it like the old abbott and costello routine .
if she is 10 years old and you are 40 then you are 4x older . so you wait 5 years . she is 15 and you are 45 , now you are 3x older . so you wait 15 years , shes is 30 and you are 60 , now your are 2x older . so how long do you have to wait until you are the same ?
so in the case of compounding the relationship is always 2:1 but the dollars difference between the two gets wider and wider as more cola is compounded on more cola .
run that through a compounding calculator for 30 years . the relationship will still be 2:1 but the dollars difference will be a whole lot .
just think of it as i have 2 million invested and you 1 million .
we both average 8% a year for 30 years . we will always be 2:1 but my dollars gained will be 2x yours . our principal will always have a 2x difference but in this case while our interest will always be 2:1 the amount of interest i get each year will be more and more dollars on the interest than you get . yet we will always stay 2:1 .
Last edited by mathjak107; 06-02-2018 at 03:29 AM..
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The proportional relationship is indeed constant
