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Social Security estimates
Old 12-31-2014, 10:34 AM   #1
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Social Security estimates

Trying to do some ER planning since I'm counting ER in months (4). I will be 60 when retiring but don't plan on applying for SS benefits until 66. Can't seem to find a calculator that takes that into account. The one on ssa.gov assumes you work until full retirement. Thanks
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Old 12-31-2014, 11:21 AM   #2
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If you've been working since around age 20 up to age 60, the calculator should be fine. You have enough work history to get your full estimate. It's a problem for people who retire with, say, 20 years of work history because there are a lot of zeros that don't get counted in the SS estimate.

For example, when I've used the website estimator, it tells me I'll get ~$2200 per month from SS. This is based on working until full retirement age with SS inputs from now (age 37) until then being at my average thus far. In reality, with my 20-odd year income history, my SS benefit would be more like ~$1200 per month if I indeed retire at 42. This is because with a shorter work history, my lower income years are included, and the zeros at the end of the calculation are accounted for by doing the calculation manually.

You likely don't have that issue, thus the website should give you an accurate enough estimate. Here's a page that breaks down your total payment based on the year you retire and your year of birth that might help refine your estimates along with the website calculation.

Early or delayed retirement
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Old 12-31-2014, 11:26 AM   #3
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I heard it was an 8% increase every year beyond full retirement up to age 70, when it stops increasing.
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Old 12-31-2014, 11:33 AM   #4
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Thanks for the response. I should have 35+ years of history by age 60 so standard calculator should be very close


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Old 12-31-2014, 11:38 AM   #5
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Originally Posted by sengsational View Post
I heard it was an 8% increase every year beyond full retirement up to age 70, when it stops increasing.
The 8% increase applies from 66 or 67 (depending on when full retirement is for you based on year of birth) through 70. For me, 100%*PIA is at age 67, and I get to 124% at age 70.

Based on the table I linked above, the increase from 62 - 70 is (for me):

5% (delay from 62-63)
5%
6.67%
6.67%
6.67%
8%
8%
8% (69-70)
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Old 12-31-2014, 11:55 AM   #6
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...The one on ssa.gov assumes you work until full retirement. Thanks
Between working till 66 and working till 60, the last few years add little to your benefits.

But, but, but there's a calculator downloadable from ssa.gov that will give you the exact benefit if you enter in your lifetime income history. The benefit is in today's dollars but will be COLA'd to the year when you claim.

My wife stopped work at 50, and myself at 56, so our benefits will be reduced more than yours. So, one day I bit the bullet, downloaded the program, rounded up my tax records, entered in all our incomes over the years, and got the definite answers for whenever we want to claim ours.

Then, I plugged those numbers into FIRECalc to see what my "means" are. Whoo wee! Mucho mucho spending power!

Darn! They may just change the law to reduce it, saying that we do not "need" it because we already have too much saved while working and now have to share.

PS. The PC program is called "anypia32.exe".
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Old 12-31-2014, 12:27 PM   #7
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Darn! They may just change the law to reduce it, saying that we do not "need" it because we already have too much saved while working and now have to share.
That is when we all grab our pitchforks and head to Washington DC.
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Old 12-31-2014, 12:33 PM   #8
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That is when we all grab our pitchforks and head to Washington DC.
I know many retirees on here think it's foolish, but I have yet to include SS in my retirement calculations. I figure in the next 25-30 years, something will change. In any event, if I retire as early as I plan, it'll end up accounting for ~20% of our expected expenses, or, in the most likely scenario, a nice 20% boost for the home stretch.

In other words, it's highly likely that SS will not be the difference between ER success and failure for us. Portfolio management and spending in the gap years will likely determine that.
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Old 12-31-2014, 12:37 PM   #9
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Off topic here, but I understand if SS reduction is to alleviate the tax load on our youngsters, or so that we will not require them to work till 70 to support our current benefits.

But such reduction must be across the board, and cannot punish people who saved (in 401k or IRA) and reward people did not. Else, we encourage the wrong behavior.
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Old 12-31-2014, 12:43 PM   #10
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But such reduction must be across the board, and cannot punish people who saved (in 401k or IRA) and reward people did not. Else, we encourage the wrong behavior.
When has our government hesitated implementing something when it risked/encouraged the wrong behavior?

SS is already "means tested" since 80% of the benefits are taxed as ordinary income for all but the lowest of incomes. The benefits paid are highly skewed to take the SS taxes from the higher income workers but give them little in additional benefits. Even our politicians understand that if SS is officially turned into a defacto old peoples welfare, a substantial number of people that don't get what they think they paid for will punish them.
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Old 12-31-2014, 12:58 PM   #11
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Originally Posted by szvacek View Post
Trying to do some ER planning since I'm counting ER in months (4). I will be 60 when retiring but don't plan on applying for SS benefits until 66. Can't seem to find a calculator that takes that into account. The one on ssa.gov assumes you work until full retirement. Thanks
I haven't used the official SS calculator for at least 6 months, but last time I used it there was a button to redo the calculation. At that time one could put in expected earnings of zero for the years until one collects SS.
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Old 12-31-2014, 01:07 PM   #12
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Let's try to stick to the topic. Speculation about actions not taken by government at this time will end badly.

The downloadable calculator appears to be for Windows machines only. Is there an on-line equivalent that allows entry of all our own data, or tinkering with the SSA assumptions? With the 'basic' online estimator, all I could do was feed it $0 for the last year's income to convince it to not assume I was still employed.
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Old 12-31-2014, 01:51 PM   #13
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I haven't used the official SS calculator for at least 6 months, but last time I used it there was a button to redo the calculation. At that time one could put in expected earnings of zero for the years until one collects SS.
Yep - this is the non-intuitive trick if you are quitting soon/now. Put in "0" for earnings going forward - then you can select what year you retire (62-70) and see what your SS payments will be.

As mentioned - SS payments are based on your best 35 years of work. At age 60 - you probably have more than 35 years of work so stopping income won't impact your SS payments much.
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Old 01-01-2015, 09:19 AM   #14
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If you're comfortable with spreadsheets, you can build your own calculator based on this example: Social Security Retirement Benefit Calculation
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Old 01-01-2015, 09:27 AM   #15
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PS. The PC program is called "anypia32.exe".
I downloaded that once and it was utterly confusing to the point of my abandoning the attempt at using it. You must be really smart and persistent to have figured it out!
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Old 01-01-2015, 10:46 AM   #16
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Once you haven't earned any income subject to SS tax for a few years, the benefit statement takes the hint and automatically calculates future years as zero. So if you have been out of the rat race for awhile, you might be able to pull a benefit statement from the website that reflects your correct earnings.


However, the payment estimate is not accurate for RE folks because your PIA is not finalized until the National Wage Index is set for the year before you turn 62 and can be applied in the following year. That last happened at the beginning of November, so those folks who will file in 2015 and had no earned income in 2014 should know what their PIA and the ages 62, FRA and 70 monthly payments are by downloading a current benefit statement. At least that's what I understand from wading through the SSA website.


My guess is that the "estimate" if you are under the filing age is based on current NWI calculations, but I have not been able to find the basis of the estimate calculation on the SSA website. I do know my benefit estimate went up every year after I retired, even when the statement started showing zero earnings for the most recent and all future years.
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Old 01-01-2015, 10:54 AM   #17
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I downloaded that once and it was utterly confusing to the point of my abandoning the attempt at using it. You must be really smart and persistent to have figured it out!
That program is certainly not one of finer examples of software. Do you have the latest version? I downloaded it perhaps 6 months ago, and the version is 2014.1.

I entered in my income history, then my wife's, and save them. So now I have two data files that I can revisit, and hopefully will be able to import to future versions of this program. I do not expect having to enter in any more income data; if I do, then our ER has failed.
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Old 01-01-2015, 10:57 AM   #18
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It was a longer while back than version 2014.1, so maybe it's time to try it again.
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Old 01-01-2015, 11:10 AM   #19
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Once you reach age 62, the only benefit to working longer is increasing your highest 35 years. Your taxable wages are no longer indexed up annually by the NWI. The only variable inputs appear to be your highest 35 years and the age at which you take the annuity. Unless you are really going to boost the 35 year calculation in a last burst of salary increases, there is not much of an impact on the payment.


If we see a lot of wage inflation over the next few years, the folks approaching or beyond 62 are going to be hurt if they depend on the SS benefit in retirement. The NWI portion of the PIA calculation is or will be locked in, and they will be stuck with a lower benefit.
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Old 01-02-2015, 10:08 AM   #20
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Once you reach age 62, the only benefit to working longer is increasing your highest 35 years. Your taxable wages are no longer indexed up annually by the NWI. The only variable inputs appear to be your highest 35 years and the age at which you take the annuity. Unless you are really going to boost the 35 year calculation in a last burst of salary increases, there is not much of an impact on the payment.


If we see a lot of wage inflation over the next few years, the folks approaching or beyond 62 are going to be hurt if they depend on the SS benefit in retirement. The NWI portion of the PIA calculation is or will be locked in, and they will be stuck with a lower benefit.
It's hard to put these formulas in words. But I would say this a little differently:

Once you have 35 years of wage history, the only benefit of working additional years is the replacing an earlier lower indexed income year with a later higher indexed income year.

Whether you work past 62, or you don't work past 62, your earlier wages are only indexed up to the year you turn 60. So the gap between (this year's post-60 wage) and the (lowest prior indexed wage) will be somewhat greater than it would have been if past wages were indexed beyond 60. It seems to me this provides slightly more benefit from working (but the benefit is usually small regardless).

Whether you work beyond 62 or don't work beyond 62, the bend point used for your PIA is fixed at the year you turn 62, and prior wages are only indexed up to age 60. However, after applying the bend point formula to get a PIA that would be used if you start benefits at age 62, that PIA is then increased with the CPI growth from 62 to your start year. (And, of course, after starting benefits your benefit continues to grow according to the CPI.)

It seems to me there's a gap in the SS indexing system for the two years from age 60 to age 62. This impacts everyone, regardless of when they quit working or start benefits. People who happen to be born in years that correspond to high wage growth in those two years get lower benefits relative to their wage histories than "equally" paid workers who happen to be born in years that correspond to low wage growth in those two years.

However, the final purchasing power of their benefit depends on the relation of wage growth and price growth. The first group could get higher benefits in terms of purchasing power if wages outran prices in those years.

All this comes from my non-expert reading of the example I linked above
Social Security Retirement Benefit Calculation
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