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What's the effect of ER on Social Security payout?
Old 08-29-2012, 09:32 AM   #1
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What's the effect of ER on Social Security payout?

I'm sure I could research this at the SSA site, but I imagine many of you know the answer off the top of your head.

Will ER effect my eventual SS payout? Or is there a point at which you are fully 'vested'?
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Old 08-29-2012, 09:43 AM   #2
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Answer is a lot less than you'd think. You can go to the SS site and manually enter your data for an exact answer.
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Old 08-29-2012, 10:08 AM   #3
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Answer is a lot less than you'd think. You can go to the SS site and manually enter your data for an exact answer.
+1

You can estimate how much you'll get retiring early using their estimator here
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Old 08-29-2012, 10:24 AM   #4
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It's based on your top 35 years. If you've got 35 good years in then you'll see very little change. If your earnings are way higher now than when you first started earning, or if you're retiring early enough that the top 35 includes part-time or 0 years, it'll hit you harder. Do the estimator to see how hard.
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Old 08-29-2012, 10:27 AM   #5
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Isn't the question asking whether ER but delaying SS until some later date will affect the amount? My impression is that it doesn't, unless by keeping working you could have some better earning years. If you have the necessary number of quarters at the max level, does retiring at say 60 and waiting to take SS until 66 change the amount you receive at 66 if you had worked untill 66? That is how I understand the question.
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Old 08-29-2012, 10:42 AM   #6
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A few years ago I downloaded the SS estimator program to see how it compared to my spreadsheet's calculation using the SS benefit formula's instructions in the SSA website. I had understood everything well, as the difference was only a few dollars per month.

I worked full-time for a full calendar year from 1986-2000 and had a combination of part-time and full-time months in 1982, 1983, 1985 and from 2001-2008 so I had to enter a bunch of zeroes for the rest of the years to get to 35. But when I compared this to my 2008 part-time salary assuming ~3% raises to get me to 35 non-zero values, I found that my estimated SS monthly benefits were only about 11% higher. This was because I was just entering the 15% "bend point" at which only 15% of my income would be replaced by SS. So if you see you are in that 15% bend point then your reduced SS benefits from an ER won't be much.
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Old 08-29-2012, 11:16 AM   #7
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I've run the numbers on the SSA's own site with their calculator. I found that retiring at 55 instead of 62 would reduce my benefit by about 6%.
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Old 08-29-2012, 12:16 PM   #8
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Thanks everyone. I've run some numbers.

The problem is if you enter a lower retirement age, the site only shows you the benefit that you'd receive at 62.

Can I assume that the deflator is constant for the other ages?

In other words:

If I retire at 45, and take payments at 62, I'd get 78% of the benefit that I would receive if I worked until retirement. From that, can I assume that retiring at 45 and collecting starting at 70 would give me 78% of the benefit I'd receive at 70 if I worked until retirement? (i hope that question is clear, I'm trying to infer the numbers that the site doesn't give me by assuming linearity)
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Old 08-29-2012, 12:57 PM   #9
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Originally Posted by jon-nyc View Post
Thanks everyone. I've run some numbers.

The problem is if you enter a lower retirement age, the site only shows you the benefit that you'd receive at 62.

Can I assume that the deflator is constant for the other ages?

In other words:

If I retire at 45, and take payments at 62, I'd get 78% of the benefit that I would receive if I worked until retirement. From that, can I assume that retiring at 45 and collecting starting at 70 would give me 78% of the benefit I'd receive at 70 if I worked until retirement? (i hope that question is clear, I'm trying to infer the numbers that the site doesn't give me by assuming linearity)
I found that there's a mode where you can put in the annual salary... so you put your retirement age at 70 (when you plan to take SS) and put $0 in for the years between when you stop working and age 70.

It's not intuitive... but you can get the number out of their calculator.
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Old 08-29-2012, 01:00 PM   #10
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Ok, looks like I need to download the detailed calculator for that. I'll try it.

Thanks.
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Old 08-29-2012, 01:08 PM   #11
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Originally Posted by jon-nyc View Post
Ok, looks like I need to download the detailed calculator for that. I'll try it.

Thanks.
You don't.
Go through the normal estimation.
Click on the "Create Scenarios" button.
Select retirement age of 70, and future earnings of zero.
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Old 08-29-2012, 02:34 PM   #12
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You don't.
Go through the normal estimation.
Click on the "Create Scenarios" button.
Select retirement age of 70, and future earnings of zero.
Correct. The detailed calculator is obsolete. It's still on the SSA site, because it's used for estimating WEP and GPO reductions. You can still use it for normal benefit calculations, but the estimator makes it unnecessary, unless one enjoys entering data.
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Old 08-29-2012, 02:49 PM   #13
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You don't.
Go through the normal estimation.
Click on the "Create Scenarios" button.
Select retirement age of 70, and future earnings of zero.
That works for estimating my benefit if I retire now and take payments at 70, but not so much if I work 5 more years and take payments at 70.

Nevertheless, that's one more data point than I have now. I'll give it a try.
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Old 08-29-2012, 04:37 PM   #14
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Quote:
Originally Posted by jon-nyc View Post
Thanks everyone. I've run some numbers.

The problem is if you enter a lower retirement age, the site only shows you the benefit that you'd receive at 62.

Can I assume that the deflator is constant for the other ages?

In other words:

If I retire at 45, and take payments at 62, I'd get 78% of the benefit that I would receive if I worked until retirement. From that, can I assume that retiring at 45 and collecting starting at 70 would give me 78% of the benefit I'd receive at 70 if I worked until retirement? (i hope that question is clear, I'm trying to infer the numbers that the site doesn't give me by assuming linearity)

From SS website:
For example, if you retire at age 62, your benefit would be about 25 percent lower than what it would be if you waited until you reach full retirement age.

For example, if you were born in 1943 or later, we will add 8 percent per year to your benefit for each year that you delay signing up for Social Security beyond your full retirement age.
So I believe that if your take your benefit at age 62 if you quit working at age 45 divided by (1-25%) times (1+(8%*4)) the result would approximate the benefit at age 70 if you stop working at age 45.
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