Social Security if you coast last few years

**Rich_in_Tampa** · 06-25-2006, 01:34 PM

So I've pretty much maxed out on SS taxable income for a million years. About as many "credits" as you can reasonably have. Now I'm contemplating coasting in the 5 years prior to full retirement with a part-time job. My income may or may not meet the maximal taxable ss limits in those last 5 years.

My question is whether your ultimate SS payments are based on total lifetime credits earned, or if their is some kind of averaging going on for the last few years prior to retirement. That is, will I be penalized in my ss check at age 66 if I coast from 60 to 65? Or am I good for the max based on credits earned til now?

Jarhead* · 06-25-2006, 01:57 PM

Quote:

Originally Posted by Rich_in_Tampa

So I've pretty much maxed out on SS taxable income for a million years. About as many "credits" as you can reasonably have. Now I'm contemplating coasting in the 5 years prior to full retirement with a part-time job. My income may or may not meet the maximal taxable ss limits in those last 5 years.

My question is whether your ultimate SS payments are based on total lifetime credits earned, or if their is some kind of averaging going on for the last few years prior to retirement. That is, will I be penalized in my ss check at age 66 if I coast from 60 to 65? Or am I good for the max based on credits earned til now?

Rich: You should get the maximum (Or so close you won't know the difference).

I retired 20 years ago at age 50, and my soc. sec. check at age 62 was about $100.00 less than if I would have continued contributing until age 62. (It was a surprise to me that it wasn't more punitive than it was). In any case, not a problem for you at this point.

REWahoo · 06-25-2006, 02:10 PM

Rich, Jarhead is correct, which is something he rarely hears from his DW

.

SS uses your highest 35 years of earnings to calculate your benefits. In your case, having no earnings for the last 5 years before drawing SS won't amount to pocket change.

**Rich_in_Tampa** · 06-25-2006, 02:34 PM

REWahoo and Jarhead,

Thanks for the info and the link. I should be OK.

tryan · 06-25-2006, 03:51 PM

Wouldn't it be cool if as a fix to the SS problem they decided to calculate bennies as the best 30 or 25 years. Same equation just smaller numbers that wouldn't hurt the FIRE'd.

OK, I woke up.

haha · 06-25-2006, 06:19 PM

Quote:

Originally Posted by tryan

Wouldn't it be cool if as a fix to the SS problem they decided to calculate bennies as the best 30 or 25 years.* Same equation just smaller numbers that wouldn't hurt the FIRE'd.

I guess FDR just messed up back in '36 when he made SS a safety net for regular folks. He mustn’t have foreseen the need of late 20th-early 21st century slackers ERs for something tailored to cushion their SWRs. Too bad we didn't have President Bush back then!

Mr. Hyde

shorttimer · 06-25-2006, 06:56 PM

something else that a financial planner told us was that earnings are adjusted for inflation. If you earned $12,000 in 1975 that would not count as twelve thousand, but some inflation adjusted number, probably in the fourties. I could not find anything like that on the social security website but I am sure someone will correct me if I am wrong!!

**Rich_in_Tampa** · 06-25-2006, 09:20 PM

Quote:

Originally Posted by HaHa

I guess FDR just messed up back in '36 when he made SS a safety net for regular folks. He mustn’t have foreseen the need of late 20th-early 21st century slackers ERs for something tailored to cushion their SWRs. Too bad we didn't have President Bush back then!

I guess you could look at it that way, but when I see how much I've paid in (not to mention as an employer back in private practice years ago), I cringe at what it would really be worth today if I invested it back then.

Still, FDR had the right idea. My parents would have been destitute without SS and my and brother's help.

haha · 06-25-2006, 10:59 PM

Rich, my remark was not directed to you, or to anyone in particular. Just stirring the pot.*

cute fuzzy bunny · 06-26-2006, 11:29 AM

It was a lot simpler back then. If people had no savings or family to support them, they just kept working until they fell down. Or lived in large group homes trying to subside on what little they had. Most people worked until they dropped. The idea of retirement for most people simply didnt exist.

Very little math involved. Pretty straightforward to plan your retirement and not a lot of SWR calculations required.

New Thinking · 06-26-2006, 12:57 PM

Shorttimer - You are correct in that all "earned income" is brought up to current dollars using a "wage index" so that $12,000 in 1975 is brought forward using the wage index - up to age 60..Believe it has averaged 4% per year over last few decades. From 60 on, COLAs are tied to CPI.

d · 06-26-2006, 01:38 PM

Quote:

but I am sure someone will correct me if I am wrong

... and sometimes you'll be "corrected" even when your right!

Sandman · 02-22-2007, 01:03 AM

Instead of starting a new thread, I did a search and found a related subject from a few months back. Here is my situation:

I presently have sufficient ‘credits’ to become eligible for SS at retirement (confirmed by SS calculation report). However, since I have spent most of my career working overseas, I have not contributed anything to the program since 1992.

I am in a situation where I can now choose to contribute to SS or keep my payroll offshore and not contribute.

My question is this: I am only planning to work for another 2 – 3 more years before ER at age 55. For believers in the future of our SS system, do you think that it would make sense to contribute 6.2% of my pay check to “boost” my average earnings calculation for SS or just put the money in the bank?

teejayevans · 02-22-2007, 06:13 AM

Quote:

Originally Posted by Sandman

My question is this: I am only planning to work for another 2 – 3 more years before ER at age 55. For believers in the future of our SS system, do you think that it would make sense to contribute 6.2% of my pay check to “boost” my average earnings calculation for SS or just put the money in the bank?

Put the 6.2% in the bank, you'll never get you're money's worth from the Govt
Tom

ScaredtoQuit · 02-22-2007, 06:49 AM

Sandman, Teejay is right. To get a more precise answer of what the impact will be, got to SSA.gov and plug in your annual lifetime earnings from your statement. You can do two computations - one with and one without. The difference is what you would be leaving on the table.

Nords · 02-22-2007, 07:45 AM

Quote:

Originally Posted by Sandman

For believers in the future of our SS system, do you think that it would make sense to contribute 6.2% of my pay check to “boost” my average earnings calculation for SS or just put the money in the bank?

You're qualified to someday draw a Social Security distribution for the money you already have in the program, right?

I think you're asking an asset-allocation question-- whether you should put more of your money into the world's safest COLA-adjusted annuity. Very few posters deem it necessary to do so, and you could always get more conservative later by purchasing an annuity from Vanguard (AIG) or some other major insurer. However if you start putting more money into SS now then you lose the flexibility.

If you're looking for safety then you could probably duplicate most of the benefits of an SS distribution with TIPS or I bonds.

Craig · 02-22-2007, 08:24 AM

Thanks for the thread and calculator ... I've gone to their site before, and used the quick calculator to see what I can expect (hope for ...), but I had never specifically looked at this question.

When I ran the numbers with and without working until age 62, I found it made a $10/month difference. Nice ... if the money is really paid out in that manner, eventually.

jdw_fire · 02-22-2007, 02:15 PM

Quote:

Originally Posted by Sandman

I presently have sufficient ‘credits’ to become eligible for SS at retirement (confirmed by SS calculation report). However, since I have spent most of my career working overseas, I have not contributed anything to the program since 1992.

I am in a situation where I can now choose to contribute to SS or keep my payroll offshore and not contribute.

My question is this: I am only planning to work for another 2 – 3 more years before ER at age 55. For believers in the future of our SS system, do you think that it would make sense to contribute 6.2% of my pay check to “boost” my average earnings calculation for SS or just put the money in the bank?

Sandman,

The correct answer depends on how much your previous earnings were. If my math is correct you haven't paid into SS since you were 37 yo, which means you have no where near 35 years of paying into SS. So let's say you already have 15yrs of paying the max amount, if you work 2 more years at $97.5k/yr the SS tax you will pay is $97.5K*6.2% * 2 = $12090. For that amount starting at your SS retirement age you will get ~$1783/yr for life, which is a pretty big number for the amount paid. This amount will be adjusted up by wage indexing for the years from now untill 2 yrs before you actually start SS and after you start taking it the amount will be COLAed by CPI for the rest of your life. (BTW if your actual numbers are smaller this can only get better)

These are hypothetical numbers but as you can see the pay back can be quite large. This all depends on your actual numbers so you need to get SSA's calculator and run the numbers for your situation and then decide for yourself if it makes sense.

Sandman · 02-23-2007, 04:01 AM

Quote:

These are hypothetical numbers but as you can see the pay back can be quite large. This all depends on your actual numbers so you need to get SSA's calculator and run the numbers for your situation and then decide for yourself if it makes sense.

I ran the SSA's calculator and if I interpret the results correctly, I would be able to increase my benefits by ~$170 per month if I contributed at the maximum for the next two years. This would appear to be a fairly decent payback, considering that this amount will be COLAed by CPI for the rest of my life at the time of normal retirement. Of course, this assumes that there are no changes in the law for future benefits payable by SSA...

Thanks to all for the feedback.

bongo2 · 02-23-2007, 09:54 AM

Sandman, do you only have to contribute your 6.2%, or would you have to contribute your 6.2% + your employers 6.2% + medicare (for which you personally get nothing) = 1.45% x 2 for a total of roughly 15.3%. The return on 6.2% should be good, the return on 15.3% maybe not.

06-25-2006, 01:34 PM	#1
Rich_in_Tampa Moderator Join Date: Feb 2006 Location: Tampa Posts: 5,879	Social Security if you coast last few years So I've pretty much maxed out on SS taxable income for a million years. About as many "credits" as you can reasonably have. Now I'm contemplating coasting in the 5 years prior to full retirement with a part-time job. My income may or may not meet the maximal taxable ss limits in those last 5 years. My question is whether your ultimate SS payments are based on total lifetime credits earned, or if their is some kind of averaging going on for the last few years prior to retirement. That is, will I be penalized in my ss check at age 66 if I coast from 60 to 65? Or am I good for the max based on credits earned til now? __________________ Rich Tampa, FL (10% retired) As if you didn't know..If the above message happens to contain medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any medical purpose whatsoever. Consult your own doctor for all medical advice.

06-25-2006, 02:10 PM	#3
REWahoo Moderator Emeritus Join Date: Jun 2002 Location: Texas Hill Country Posts: 11,493	Re: Social Security if you coast last few years Rich, Jarhead is correct, which is something he rarely hears from his DW . SS uses your highest 35 years of earnings to calculate your benefits. In your case, having no earnings for the last 5 years before drawing SS won't amount to pocket change. __________________ [MODERATOR EDIT]

06-25-2006, 02:34 PM	#4
Rich_in_Tampa Moderator Join Date: Feb 2006 Location: Tampa Posts: 5,879	Re: Social Security if you coast last few years REWahoo and Jarhead, Thanks for the info and the link. I should be OK. __________________ Rich Tampa, FL (10% retired) As if you didn't know..If the above message happens to contain medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any medical purpose whatsoever. Consult your own doctor for all medical advice.

06-25-2006, 03:51 PM	#5
tryan Thinks s/he gets paid by the post Join Date: Mar 2005 Posts: 1,454	Re: Social Security if you coast last few years Wouldn't it be cool if as a fix to the SS problem they decided to calculate bennies as the best 30 or 25 years. Same equation just smaller numbers that wouldn't hurt the FIRE'd. OK, I woke up. __________________ FIRE'd since 2005

06-25-2006, 06:56 PM	#7
shorttimer Recycles dryer sheets Join Date: Jan 2006 Posts: 116	Re: Social Security if you coast last few years something else that a financial planner told us was that earnings are adjusted for inflation. If you earned $12,000 in 1975 that would not count as twelve thousand, but some inflation adjusted number, probably in the fourties. I could not find anything like that on the social security website but I am sure someone will correct me if I am wrong!!

06-25-2006, 10:59 PM	#9
haha Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Apr 2003 Location: Seattle Posts: 8,392	Re: Social Security if you coast last few years Rich, my remark was not directed to you, or to anyone in particular. Just stirring the pot.* __________________ "Show 'em just enough to win the turkey."- Former KY Governor Bert Combs

06-26-2006, 11:29 AM	#10
cute fuzzy bunny Give me a museum and I'll fill it. (Picasso) Give me a forum ... Join Date: Dec 2003 Location: Losing my whump Posts: 22,527	Re: Social Security if you coast last few years It was a lot simpler back then. If people had no savings or family to support them, they just kept working until they fell down. Or lived in large group homes trying to subside on what little they had. Most people worked until they dropped. The idea of retirement for most people simply didnt exist. Very little math involved. Pretty straightforward to plan your retirement and not a lot of SWR calculations required. __________________ Many an optimist has become rich by buying out a pessimist

06-26-2006, 12:57 PM	#11
New Thinking Recycles dryer sheets Join Date: Oct 2005 Posts: 150	Re: Social Security if you coast last few years Shorttimer - You are correct in that all "earned income" is brought up to current dollars using a "wage index" so that $12,000 in 1975 is brought forward using the wage index - up to age 60..Believe it has averaged 4% per year over last few decades. From 60 on, COLAs are tied to CPI.

02-22-2007, 01:03 AM	#13
Sandman Dryer sheet wannabe Join Date: Feb 2007 Posts: 16	Re: Social Security if you coast last few years Instead of starting a new thread, I did a search and found a related subject from a few months back. Here is my situation: I presently have sufficient ‘credits’ to become eligible for SS at retirement (confirmed by SS calculation report). However, since I have spent most of my career working overseas, I have not contributed anything to the program since 1992. I am in a situation where I can now choose to contribute to SS or keep my payroll offshore and not contribute. My question is this: I am only planning to work for another 2 – 3 more years before ER at age 55. For believers in the future of our SS system, do you think that it would make sense to contribute 6.2% of my pay check to “boost” my average earnings calculation for SS or just put the money in the bank?

02-22-2007, 06:49 AM	#15
ScaredtoQuit Recycles dryer sheets Join Date: Jan 2007 Posts: 149	Re: Social Security if you coast last few years Sandman, Teejay is right. To get a more precise answer of what the impact will be, got to SSA.gov and plug in your annual lifetime earnings from your statement. You can do two computations - one with and one without. The difference is what you would be leaving on the table.

02-22-2007, 08:24 AM	#17
Craig Full time employment: Posting here. Join Date: Dec 2004 Posts: 714	Re: Social Security if you coast last few years Thanks for the thread and calculator ... I've gone to their site before, and used the quick calculator to see what I can expect (hope for ...), but I had never specifically looked at this question. When I ran the numbers with and without working until age 62, I found it made a $10/month difference. Nice ... if the money is really paid out in that manner, eventually.

02-23-2007, 09:54 AM	#20
bongo2 Recycles dryer sheets Join Date: Aug 2003 Posts: 443	Re: Social Security if you coast last few years Sandman, do you only have to contribute your 6.2%, or would you have to contribute your 6.2% + your employers 6.2% + medicare (for which you personally get nothing) = 1.45% x 2 for a total of roughly 15.3%. The return on 6.2% should be good, the return on 15.3% maybe not.