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Social Security math wiz?
Old 11-16-2019, 06:06 PM   #1
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Social Security math wiz?

I'm dumbfounded to figure this out, or too lazy to crunch the numbers. Lets say you have 35 credit years, but some years are low, and you are currently earning up to the maximums.

Assuming you are beyond the 2nd bend point, how do you calculate your impact of replacing a low income year with a higher income year of $100,000 per year each of the 3 years?

Assumption 2 is that your current benefit is $1,900 per month @ 62 if you stopped now (52).

Assumption 3 $48,000 could be put into retirement accounts earning $200 per month. If taxes are paid and realized as social security benefit it would cost a bit over 38% or $18,240 in tax.

Lets say for example the low years are $650, 2,000 and 5,000 that you want to replace. How much of a monthly dollar increase will you receive in your benefit for an extra 1, 2, and 3 years of work?

My gut is saying it isn't worth the extra time if it is just to boost the SS benefit. But I'm not sure how little it matters.

The real interest in this exercise is SS money, survivor benefits and the like are cash cows (guaranteed money) that should be fully fattened up before slaughter. Plus do to self employment I can realize income, expense income or defer income.
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Old 11-16-2019, 06:21 PM   #2
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Originally Posted by Luck_Club View Post
Lets say for example the low years are $650, 2,000 and 5,000 that you want to replace. How much of a monthly dollar increase will you receive in your benefit for an extra 1, 2, and 3 years of work?

You have to multiply those year's earnings by the indexing factor. Then, any yearly earnings over that amount will increase your average earnings by 1/35th of the difference. Multiply that by your third bend point value, and you have it.



... the typical responses are that everyone knows how to do this...
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Old 11-16-2019, 06:24 PM   #3
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Use this document, second page, as a guide to set up your situation in Excel and then play with it.

https://www.ssa.gov/pubs/EN-05-10070.pdf
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Old 11-16-2019, 06:33 PM   #4
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Originally Posted by pb4uski View Post
Use this document, second page, as a guide to set up your situation in Excel and then play with it.

https://www.ssa.gov/pubs/EN-05-10070.pdf
Play with what??!!
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Old 11-16-2019, 07:45 PM   #5
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You have to multiply those year's earnings by the indexing factor. Then, any yearly earnings over that amount will increase your average earnings by 1/35th of the difference. Multiply that by your third bend point value, and you have it.



... the typical responses are that everyone knows how to do this...
Ok for example: $2000 due to the index is now $4000, soooo...

($100,000-4000)/35=2742.85*.15=$411.42/12 = $34.28 monthly increase in benefit.

$8228 in additional benefits over a 20 year period<$34,000 in taxes paid on the additional $100K in income.


WHERE IS THE DOOR AGAIN?
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Old 11-16-2019, 10:36 PM   #6
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Play with what??!!
Oh behave!!
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Old 11-18-2019, 07:28 AM   #7
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When I ran my numbers, replacing some seemingly super low years with the max SS income made so little difference that I rang the bell and decided to end my 38 year career. Lots of other considerations but for me it didn't make much sense to continue working for a miniscual increase in SS.
Quote:
Originally Posted by Luck_Club View Post
Ok for example: $2000 due to the index is now $4000, soooo...

($100,000-4000)/35=2742.85*.15=$411.42/12 = $34.28 monthly increase in benefit.

$8228 in additional benefits over a 20 year period<$34,000 in taxes paid on the additional $100K in income.


WHERE IS THE DOOR AGAIN?
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Old 11-18-2019, 08:27 AM   #8
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I run my numbers through the social security calculator every so often, and came to the conclusion awhile back that once you get to a certain point, working an extra year doesn't do much for your benefit. Right now, I only have 33 years of earnings in, so I'm still in the process of replacing zero years. But still, my projected SS at 62 (2032 for me) if I retire now, in 2019, is $15,624 per year. It's $16,176 if I retire in 2020. So even now, replacing a zero year with a good year is only upping me by about $500 per year.

In the forecasts, by the time I choose retiring at 59 versus 58, the jump is only about $100 per year. There really isn't a big jump until I choose retiring at 63, versus 62, but there the big jump is from delaying receiving benefits, not working an extra year.
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