Social security maximum earning

[HillCountry]

The maximum taxable earning for 2017 will be 127,200, 7%+ more than 118,500 in 2016. The benefit used to be calculated based on the historical earnings adjusted to current maximum. But starting from 2017, they must have a different number to calculate benefit.

 

[bw5972]

The maximum taxable earning for 2017 will be 127,200, 7%+ more than 118,500 in 2016. The benefit used to be calculated based on the historical earnings adjusted to current maximum. But starting from 2017, they must have a different number to calculate benefit.

Maximum taxable earnings is not part of the benefit calculation.

"An individual's earnings are always indexed to the average wage level two years prior to the year of first eligibility. Thus, for a person retiring at age 62 in 2017, the person's earnings would be indexed to the average wage index for 2015 (48,098.63). Earnings in a year before 2015 would be multiplied by the ratio of 48,098.63 to the average wage index for that year; earnings in 2015 or later would be taken at face value.”

 

[clobber]

The maximum taxable earning for 2017 will be 127,200, 7%+ more than 118,500 in 2016. The benefit used to be calculated based on the historical earnings adjusted to current maximum. But starting from 2017, they must have a different number to calculate benefit.

The calculation is here:

https://www.ssa.gov/oact/cola/cbbdet.html

 

[Blue Collar Guy]

The calculation is here:

https://www.ssa.gov/oact/cola/cbbdet.html

Someone with a PhD. had to come up with that formula.

 

[gerntz]

Maximum taxable earnings is not part of the benefit calculation.

"An individual's earnings are always indexed to the average wage level two years prior to the year of first eligibility. Thus, for a person retiring at age 62 in 2017, the person's earnings would be indexed to the average wage index for 2015 (48,098.63). Earnings in a year before 2015 would be multiplied by the ratio of 48,098.63 to the average wage index for that year; earnings in 2015 or later would be taken at face value.”

nm

 

[HillCountry]

clarified below

 

[HillCountry]

clarified below

 

[HillCountry]

OK, this is a good example -
https://www.ssa.gov/oact/progdata/retirebenefit1.html

It is total indexed earning.

The nominal earning so after is upto the max taxable earning.

 

[clobber]

Someone with a PhD. had to come up with that formula.

I have one and I don't understand it!

 

[clobber]

OK, this is a good example -
https://www.ssa.gov/oact/progdata/retirebenefit1.html

It is total indexed earning.

The nominal earning so after is upto the max taxable earning.

Ok - I got confused as to what we are even talking about. Thank your for bringing to my attention that there are two different numbers. The numbers $118,500 (2016) and $127,200 (2017) are used for both the "contribution base" and the other is the "benefit base."

 

[bobandsherry]

Someone with a PhD. had to come up with that formula.

No just someone in government in hopes of confusing everyone

 

[Independent]

I think the formula says:

(wage base for 2017) = (wage base for 1994) x (wage index for 2015) / (wage index for 1992).

I don't have a phd, but I understand that.

 

[Independent]

I think the contribution and benefit base are the same number.
You only pay taxes up to the contribution base. Your benefit is based on your income below the benefit base. So, your benefit and taxes are based on the same wages.

The contribution base usually goes up with the wage index. There is an exception that the contribution base cannot go up in a year when there is no CPI linked benefit increase. I don't see an obvious reason for such a rule, (but it's already kind of late at night for this type of thinking).

So, the wage index went up from 2015 to 2016, and again from 2016 to 2017. But, the CPI didn't go up from 2015 to 2016. Hence, there was no increase in the contribution base from 2015 to 2016. This combination led to the increase from 2016 to 2017 including two year's worth of wage index increases.

 

[pb4uski]

Someone with a PhD. had to come up with that formula.

Nah... more likely it was a lawyer based on advice from a PhD.

 

[txtig]

All I know is that I paid the max SS tax for many, many years. This year my SS tax will be zero. Sweet!!!

 

[scrabbler1]

All I know is that I paid the max SS tax for many, many years. This year my SS tax will be zero. Sweet!!!

When I ERed 9 years ago, I used the money I was paying into SS (and the commutation costs) to pay for my health insurance. As much as I dislike paying rising HI premiums, I feel it's a better use of my money than paying the LIRR and SS.

 

[euro]

All I know is that I paid the max SS tax for many, many years. This year my SS tax will be zero. Sweet!!!

Same here!

 

[GalaxyBoy]

+1

Well, at least next year I won't pay any SS tax.

You working folks keep on paying it; we need the money!

 

[Perryinva]

Very interesting. I never knew that no indexing occured for earnings made age 60 and higher! What is not clear is if the indexing multiplier keeps increasing for the years prior to age 60, the longer one delays, or are they frozen once one reaches age 60.

 

[growing_older]

Index multiplier is fixed at the year you reach age 60. If you delay past the age you could have collected SS, your benefit will still increase according to the CPI they use to calculate benefit increases, adjusted for lower benefit if you claim early. The index multiplier is figured individually for each year but no longer adjusts after age 60. Most recent years the calculation of index multiplier is based on a wage inflation measure, but there are a few years (early 80's and before) where there was direct legislation for minor tweaks.

The basic formula is still adjust each earnings year for inflation between then and the year you turn 60. Years after you turn 60 are not adjusted. Take the top 35 years and drop the rest. Minor variations in adjustments or earnings cap for specific years can make minor differences, but the general formula is accurate enough to be very very close to your actual benefit amount.