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Hi I'm new - Question bout SS and Inflation
Old 03-21-2009, 09:22 AM   #1
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Hi I'm new - Question bout SS and Inflation

Hi I'm new to the forum. I've been planning on an early retirement for many years but life gets in the way sometimes. Now I'm just hoping to be able to retire.

I'm 52 and DW (I hope that means Da Wife or Da Woman or something like that) is 55. We hope to be able to retire in 5-7 years but much will depend on the returns on our savings, 201K and other investments.

I had a question hoping someone here can shed some light for me. While I hope not to rely on SS for my retirement, it is an asset and would be foolish not to manage/plan like any other asset, IMHO. If I were to quit working say at 57-58 and not draw till I'm 66.4 what impact would that have on my monthly draw? The SSA says the monthly draw is based on "your average earnings over your working lifetime". Taking 10 years of my highest earnings out of the average equation would impact that average. Another unknown is what about inflation from the time I quit working to when I start the draw. I believe that we are going to see a return to serious inflation in the mid term. Right about the time I would like to retire. So if I were to qualify for say $1000/month then we had 10% inflation for several years what impact would that have on my draw when I start at 66.4 ?

So I guess I'm interested in the impact of inflation from the time I quit working to the time I start a SS draw.

Looking forward to the experiences of all the folks here. Tks
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Old 03-21-2009, 10:01 AM   #2
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You might want to check ssa.gov which has benefit calculators. It would be hard to predict SS payments in a hypothetical future. In theory, they are adjusted for cost of living and would keep pace, though there are many ways the calculations could end up less than actual inflation. Likewise, giving up a few years of earnings may or may not affect your payments. The monthly draw is based on the average earnings (up to the SS cap) of the 35 highest years, where each year is adjusted for inflation individually. If you already have 35 years of max earnings, additional years don't change anything. Likewise, the "based on" is not a simple average, so that lower earners get a higher percentage of their incomes. This can mean that a payout after many years of high income is impacted only slightly by stopping work early, but you'll have to work with the calculators and real numbers to find out how much.
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Old 03-21-2009, 02:02 PM   #3
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RetireBy90

Welcome to the forum. As growing_older indicated, the biggest hurdle is to complete 35 years of non-zero years. If you w*rk less than 35 years, the SS system assumes a "0" for those years. If you w*rk more than the 35, I believe they begin to replace smaller years with bigger years if appropriate. However, because of the inflation (of salary) calculation they use, you can't assume that making $50K this year is a "bigger" year than, say, $40K in 1978. In any case, the system is somewhat tilted toward higher % replacement of lower salaries. It's complicated and can change, so YMMV and you should read the web site and/or sit down with an SS rep. They tend to be knowledgeable and helpful - just leave plenty of time to get an appointment (weeks??)

Oh, regarding the abbreviations we use here (such as DW) see * Acronyms and Slang Frequently Used on the Forum *

Hope you will continue to check back. New blood is always appreciated. (Mine is tired this AM.)
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Old 03-21-2009, 02:44 PM   #4
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I've wondered about this, too. As for the 35 non-zero years, is there a minimum amount that has to be earned in order for the year to count?
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Old 03-21-2009, 03:17 PM   #5
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Quote:
Originally Posted by RetireBy90 View Post
Hi I'm new to the forum. I've been planning on an early retirement for many years but life gets in the way sometimes. Now I'm just hoping to be able to retire.

I'm 52 and DW (I hope that means Da Wife or Da Woman or something like that) is 55. We hope to be able to retire in 5-7 years but much will depend on the returns on our savings, 201K and other investments.

I had a question hoping someone here can shed some light for me. While I hope not to rely on SS for my retirement, it is an asset and would be foolish not to manage/plan like any other asset, IMHO. If I were to quit working say at 57-58 and not draw till I'm 66.4 what impact would that have on my monthly draw? The SSA says the monthly draw is based on "your average earnings over your working lifetime". Taking 10 years of my highest earnings out of the average equation would impact that average. Another unknown is what about inflation from the time I quit working to when I start the draw. I believe that we are going to see a return to serious inflation in the mid term. Right about the time I would like to retire. So if I were to qualify for say $1000/month then we had 10% inflation for several years what impact would that have on my draw when I start at 66.4 ?

So I guess I'm interested in the impact of inflation from the time I quit working to the time I start a SS draw.

Looking forward to the experiences of all the folks here. Tks
You may want to try looking at this link: The Difference Between Retirement Age & Stop Work Age
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Old 03-21-2009, 03:35 PM   #6
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Thanks for suggesting I check ssa.gov - I found most of the information I was looking for.

For janetvj and any others interested in what I found, check out Benefits Calculators: About the Social Security Retirement Estimator After entering some identification info, you will end up at a page where you can enter your income and receive an estimate of your draw rate. You can plan more than one scenario and view the results side by side (or under each other as it were). So I scopped out what if I stopped working at 57, 62, and 67. There is a link to explain stop work age - when you say FIRE and retirement age - when you start draw on ssa benefits. I included a 3% increase in salary each year. It assumed I would start the draw at 62 for ages 57 and 62, and at 67 for stop work at 67. The difference was:
57: $1,563
62: $1,663
67: $2,410

You can draw your own conclusions from the numbers, looks to me like working 5 years is not worth it just for a bigger draw or benefit. However, 57 to 67, almost $900 a month more. Guess if we don't see any relief from the market in the next 10 years and I could stay with it that long without getting laid off or going crazy, at least I'd have something to add to my other retirement income to get me and the DW fed.

There is lots of info on the site, I spent a while just floating between pages. One worth mentioning is a faq page at: Benefits Planner: Frequently asked retirement questions and a link at the bottom "Find an answer to your question" that has answers to 61 more questions.
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Old 03-21-2009, 04:01 PM   #7
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Except that you cannot draw SS until at LEAST 62 years old (baring disability), and yes, it is funny how much good information can be found when you go to the source.
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Old 03-21-2009, 06:20 PM   #8
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Just dropping by to say Howdy and admire your funny screen name. I bought a book called, "How to Retire by Age 35" or something like that at age 37 or so. I think it really helped me to retire at all, in my case late in my 61st year. Hope this site helps you get there ASAP.
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