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Retiring before 62 and social security...
Old 08-21-2007, 10:23 AM   #1
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Retiring before 62 and social security...

I'm 51 years old, seriously thinking of retiring within the next few months. I went out to the social security web site and estimated my social security benefits if I quit working today. They were about $1314/month (in today's dollars) at age 62. Then I estimated my benefits assuming I worked until 62 and then retired. My benefits were then about $1470/month. This is a difference of about $150 per month less by retiring now. Does this sound about right? (I know it depends alot on each individuals income situation over the years.)

Have any of you run the numbers to see how much you would lose by retiring early? And have any of you decided to work longer to increase your social security payments? Have any of you decided that the difference wasn't enough to make it worthwhile? I'm mainly asking people that either retired or considered retiring before age 55 because they have/had the most to lose.
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Old 08-21-2007, 10:30 AM   #2
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Your numbers sound about right. Whenever I look at my SS benefit I can ball park my benefit by taking around 1 percent off your every year I quit working before full retirement age.

So your calculations are certainly in that range.

The bigger risk is that congress will change things to balance the budget.
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Old 08-21-2007, 10:58 AM   #3
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I'm in about the same situation as you. I ER'd in April @50. I had run the SS calculators several times over the past couple of years to get ballpark figures. They were similar to yours, a slight bit lower but not much. The difference between bailing @ 50, or staying until 62 (or there about) were, IMHO, not worth the BS of continuing to w*rk. In the grand scheme of things, the difference was negligible.

Besides, I didn't figure SS into my FIRE plan.....just in case it changes drastically or even goes away. I'm not 'banking' on it! When (if) I can collect it, it will be like a nice monthly bonus check!
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Old 08-21-2007, 11:05 AM   #4
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Wow, you are figuring that working longer results in excess taxes....I think that has to be 2 or 3 on the list of why to FIRE
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Old 08-21-2007, 11:13 AM   #5
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Originally Posted by maddythebeagle View Post
Wow, you are figuring that working longer results in excess taxes....I think that has to be 2 or 3 on the list of why to FIRE
I think I tend to analyze things too much....but then isn't that one of the traits of people like us that RE?
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Old 08-21-2007, 11:31 AM   #6
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Originally Posted by Goonie View Post
Besides, I didn't figure SS into my FIRE plan.....just in case it changes drastically or even goes away. I'm not 'banking' on it! When (if) I can collect it, it will be like a nice monthly bonus check!
Brilliant strategy, in my case, I might even delay until 70, so I can plow
more $ into roth accounts. I'll make that call when I get there.
TJ
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Old 08-21-2007, 11:45 AM   #7
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Brilliant strategy, in my case, I might even delay until 70, so I can plow
more $ into roth accounts. I'll make that call when I get there.
TJ
For me, being able to stuff the ROTH full is the only draw back to retiring early for me. I'm almost at my max for this tax year....just a little more to go....and I get to do the "catch up" contribution this year too!!! Then I'm all done! No more contributions...ever! ......
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Sounds about right
Old 08-21-2007, 12:18 PM   #8
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Sounds about right

Your numbers are similar to mine. If you've earned well above average income for 25-30 years, then your lifetime indexed earnings averaged over the top 35 years (missing years padded with zeroes) put you past the second bend point on computing your benefit amount. For your first earnings, at your normal retirement age you'll get 90% back, after the 1st bend point you'll get 32%, and past the 2nd point only 15%. SS may be regressive at the taxation point, but at the benefit point it certainly isn't.

I've set-up the calculations in my own spreadsheet so I can see the effect on benefits for quitting work at any age.
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Old 08-21-2007, 12:32 PM   #9
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Originally Posted by DallasGuy View Post
I'm 51 years old, seriously thinking of retiring within the next few months. I went out to the social security web site and estimated my social security benefits if I quit working today. They were about $1314/month (in today's dollars) at age 62. Then I estimated my benefits assuming I worked until 62 and then retired. My benefits were then about $1470/month. This is a difference of about $150 per month less by retiring now. Does this sound about right? (I know it depends alot on each individuals income situation over the years.)

Have any of you run the numbers to see how much you would lose by retiring early? And have any of you decided to work longer to increase your social security payments? Have any of you decided that the difference wasn't enough to make it worthwhile? I'm mainly asking people that either retired or considered retiring before age 55 because they have/had the most to lose.
Lots of people who post here are pretty analytical. If you're one of them, you would probably feel more confidant of the result if you look at the SS calculation method. The rule is:
1) index your annual earnings
2) sum the highest 35 years (fill in with zeros if you have fewer than 35)
3) divide by 35 to get an annual average, then divide by 12 to get an average monthly
4) calculate your "full" benefit as 90% of the first X dollars, 32% of the next Y, and 15% of the excess.
5) reduce the full benefit for retiring at 62 instead of your normal age (if you were born in 1956, the factor is .7333)

If you've been a high wage worker, it's possible that your 35 year average already gets you into the 15% marginal bracket.

If so, suppose that working one additional year allows you to replace a zero year with a $91,000 year. This increases your average annual wages by 91,000/35 = 2,600. Now 15% of $2,600 is $390 of additional annual benefit, if you retire at your "normal" retirement age. Or $286 at age 62.

There's a sample calculation at: Social Security Retirement Benefit Calculation
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Old 08-21-2007, 12:48 PM   #10
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I "retired" (military) at 38 (earning a maximum of about $24K per year in SS Wages) and worked very little after that, earning maybe $15,000 a year until age 47 after which I earned virtually nothing (in SS wages). Took SS at age 62 (Late 2002) and the first monthly check was for $987; current checks after 4 plus years are $1,135. I never "planned" on SS and, when younger never thought it would be there, so, beyond Medicare Part B premiums, I treat it like a windfall and just "bank" it.
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Old 08-21-2007, 02:11 PM   #11
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When (if) I can collect it, it will be like a nice monthly bonus check!
That is the exact philosophy that I took in 1970 when I was first married and getting off of active duty in the Army. My simple philosophy was to ignore SS completely and concentrate on saving/investing on my own the best that I could. If SS were still around when I decided to hang it up, then that would be some kind of extra thing.

As it works out, SS is a pretty nice thing that I can now count on and plan on tapping when I reach 66 in a few years.
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