Estimating SS benefits when retiring early

[dtbach]

OK, so I'm looking at the SS Statement I got in Dec 2010. I saw that at full retirment age 66 I would get $2,168 a month and at 70 $2862/mo.

But then I noticed above it states "At your current earning rate, if you continue working" Well, I FIRE'D my self early this year and am no longer contributing.

I assume these numbers then are bogus? i.e. I'm not working anymore so how much do I have to reduce these estimates to get a true estimate on what I should get at 66 and/or 70?

 

[dtbach]

I forgot to add, I'll be leaving for a 10 day fishing trip in remote northern Ontario in a couple of hours so wont' be able to respond until then.

But please post if you have information on how to guestimate SS benefits WITHOUT working anymore.

 

[REWahoo]

Simple: Go to the SS website, find their retirement benefit estimator and enter your current numbers, then zeroes for future year earnings.

What you'll find is there is very little penalty for early retirement when it comes to SS benefits...

 

[dtbach]

Simple: Go to the SS website, find their retirement benefit estimator and enter your current numbers, then zeroes for future year earnings.

What you'll find is there is very little penalty for early retirement when it comes to SS benefits...

REWahoo thanks! Now I can enjoy my fishing trip more knowing that I'll still get a good chunk of SS when I need to take it.

 

[MasterBlaster]

the REWahoo link is, of course, the most accurate. However that takes some work to get an answer.

One much easier "ballpark" rule of thumb is to reduce payouts by 1 percent for every year early you quit working.

So in your case, if you FIRE at 56 and start collecting SS at 66 the ballpark rule suggest you would get a 10 percent payout reduction.

Keep in mind SS only uses your 35 best years. So if you started working at 20 and retire at 55 - those reductions may not apply.

- Your mileage may vary.

 

[dtbach]

the REWahoo link is, of course, the most accurate. However that takes some work to get an answer.

One much easier "ballpark" rule of thumb is to reduce payouts by 1 percent for every year early you quit working.

So in your case, if you FIRE at 56 and start collecting SS at 66 the ballpark rule suggest you would get a 10 percent payout reduction.

Keep in mind SS only uses your 35 best years. So if you started working at 20 and retire at 55 - those reductions may not apply.

- Your mileage may vary.

I definitely have 35 years of work under my belt. 22 to 58 are the years worked full time.

 

[Backpacker]

So I decided to click around the ssa site today to see if I could find my annual income amounts (like we used to get on our annual statements). No luck, tried to sign up for a password = no luck. called the 800 # tried to sign up for a password = no luck. decided to hold for a human, was told that if I want my historical data I need to fill out a form and wait 4 months and pay a fee. I asked how I was to verify if my employer was being accurate - agent says "anythign else I can help you with?"... As she really didnt help I started chuckling and yup - she hung up on me.

gotta love the SSA

 

[haha]

So I decided to click around the ssa site today to see if I could find my annual income amounts (like we used to get on our annual statements). No luck, tried to sign up for a password = no luck. called the 800 # tried to sign up for a password = no luck. decided to hold for a human, was told that if I want my historical data I need to fill out a form and wait 4 months and pay a fee. I asked how I was to verify if my employer was being accurate - agent says "anythign else I can help you with?"... As she really didnt help I started chuckling and yup - she hung up on me.

gotta love the SSA

Just call back, if you don't like the way the employee sounds, hang up and try again. Eventually you may get a helpful one.

Ha

 

[veremchuka]

I was told that the estimates they mail are accurate despite the fact I FIREd 4 years ago. The benefit may be off by a few dollars but I was told that the amount would not be lower due to not having worked for X years prior to collecting.

Maybe a year ago I went to the site and entered all the data from the SS mailing to see what I'd get and it was the same as the mailing. So that's what I expect to get next year.

 

[bob boag]

By way of comparison my paper statement said I was eligible for $2288/mo at 66 (FRA) assuming I worked till then. When I did the online calculation & entered zero income between 55 and 66, the figure was $2208/mo

 

[rescueme]

By way of comparison my paper statement said I was eligible for $2288/mo at 66 (FRA) assuming I worked till then. When I did the online calculation & entered zero income between 55 and 66, the figure was $2208/mo

That sounds about right. Most folks overestimate the amount of reduction, assuming you have 35 years of credits.

Sure, if you work beyond 35 years, the current earnings will "replace" (based upon rate of inflation against a previous years earnings) low years, but all in all it dosen't change all that much.

 

[Backpacker]

That sounds about right. Most folks overestimate the amount of reduction, assuming you have 35 years of credits.

Sure, if you work beyond 35 years, the current earnings will "replace" (based upon rate of inflation against a previous years earnings) low years, but all in all it dosen't change all that much.

Yah; I was astounded how little value I gained from working another 7-8 years. Really makes me think this whole working gig is highly over-rated. Trade 7 years of my life for another 100 bucks a month - I dont think so!

 

[Mulligan]

This thread motivated me to check my SS benefits. I am under the WEP. I worked part time for about 12 years starting in HS. I will get $99 a month at 62. What I thought was odd was that I could work part time for the next 15 years until 62, and it would raise only to $130 a month! Definitely am not going to work part time for the increased SS benefits!

 

[scrabbler1]

I created a spreadsheet based on the benefit calculation I saw in the SSA's website so I could see the effect of retiring at age 45 as I did in 2008. I included a bunch of zeroes because I had only about 24 years with SS wages.

What I found was that the reduction of SS benefits is not a whole lot because my income replacement "bracket" (i.e. bend point) is only 15% for those extra years of disappeared wages.

What I would like to see is that annual SS statement include a zero for 2009 so it can also project my SS benefits with a bunch of zeroes. Unfortunately, the one I received earlier this year went up to only 2008, the last I had SS wages. This I found strange because the prior year's statement also went up to only 2008.

I wonder why my lack of 2009 SS wages had still not been reflected in the projected SS benefits shown in this year's statement.

 

[jdw_fire]

This thread motivated me to check my SS benefits. I am under the WEP. I worked part time for about 12 years starting in HS. I will get $99 a month at 62. What I thought was odd was that I could work part time for the next 15 years until 62, and it would raise only to $130 a month! Definitely am not going to work part time for the increased SS benefits!

then your prospective part time job doesnt pay very much, in fact much less than your early work, since your early work will, for fewer yrs worked, pay more than 3 times as much benefit. based on your stated monthly benefit you are still in the highest paying portion of the SS curve. and even assuming the worst of WEP, in this portion of the curve your SS payment (if taken at your FRA) should increase by a little more than 1.14% of your wages for every additional year of work until your total indexed income gets you off that "highest portion of the SS curve". taking SS at 62 (assuming it is 75% of FRA) should drop that rate to about 0.857%/yr of additional wages, which makes your average yearly wage over that 15 yrs: ~$2900/yr (indexed). this was a quick analysis and hopefully i didnt miss anything.

 

[GaryInCO]

Recently-ex DW did the tax reporting, and she had an underwhelming (and provably incorrect) impression of my contribution to the family coffers. As a result she ended up apportioning a smaller share of the family income to my SS# than I think I was due. Add that to the creative tax accounting to reduce our taxable (and therefore SS-reportable) income, and my recorded SS earnings are about half what I actually earned for the last 10 years.

Now that she and I have separated our finances, I should get full credit for my earnings. I'm 54 and FIRE is years away.

However from a quick look at the SS estimator, it looks like this doesn't make much difference at all. If I tell it I'm going to work another 12 years, and earn 50% more per year than I have in the past, my benefit only goes up 4%. If my earnings *double*, it only goes up 8%!!! If I tell it I'm going to earn 1/4 as much as I have been, my SS benefits only drop 6%.

So for SS benefits anyway, it appears how much you earn for the last N years of your working career doesn't make a damn bit of difference.

I saw an interesting comment on the SS site: "If you have reached your full retirement age, and are eligible for a spouse's or ex-spouse's benefit and your own retirement benefit, you may choose to receive only spouse's benefits. If you do that, you can delay receiving your own retirement benefit until a later date to take advantage of delayed retirement credits."

Which sounded really good -- DW's benefits will probably be larger than mine, and I have the option to take ex-spouse benefits instead of my own, allowing me to defer taking my own benefits until age 70. Except DW is 5 yrs younger than I am, so she won't hit 66 until I'm 71. Does anyone know if the [ex-]spouse benefits kick in at YOUR retirement age or at the SPOUSE'S retirement age?

However it also says "The spouse benefit amount will be permanently reduced by a percentage based on the number of months up to his or her full retirement age." I'm not sure if that means just your spouse benefit is reduced, but your personal benefit is unaffected? If it's just the spouse benefit, then I could theoretically start getting spousal benefits when I hit 62, with the spousal benefit reduced for early retirement, then at age 66 or 70 start drawing my own full benefit?

Anybody know how this really works?

 

[rescueme]

Does anyone know if the [ex-]spouse benefits kick in at YOUR retirement age or at the SPOUSE'S retirement age?

You cannot claim benefits (based upon another's earnings) until that person reaches FRA (Full Retirement Age), whatever it might be based upon their birth date.

Here's an actual (ours) example. DW/me are the same age (63), with my birthdate in January and hers in May. Under our plan, I will file against her three months before she turns 66 (her FRA) in slightly less than three years, but after I achieve FRA age - in January.

In July of the year she turns age 66 (you get your first SS only after a full month "waiting period" - unless you were born on the 1st or 2nd of the month), I will get 50% of her FRA benefit (even though I'll be just under 66.5 years of age).

At age 70, I'll start getting my own SS benefit, much increased from my DW's 50% SS. However, I'll have the advantage of the delay of my SS (from age 66-69) for longevity credits - 8% per year (along with any COLA), but more importantly assuming I die first, DW will get an SS benefit of 2x her age 66 FRA benefit.

The key is (assuming you are not filling for early benefits, at age 60 due to death of your spouse, which is a completely different situation) is centered around that FRA age.

 

[GaryInCO]

Bummer. I thought it sounded too good. Thanks!

 

[Mulligan]

then your prospective part time job doesnt pay very much, in fact much less than your early work, since your early work will, for fewer yrs worked, pay more than 3 times as much benefit. based on your stated monthly benefit you are still in the highest paying portion of the SS curve. and even assuming the worst of WEP, in this portion of the curve your SS payment (if taken at your FRA) should increase by a little more than 1.14% of your wages for every additional year of work until your total indexed income gets you off that "highest portion of the SS curve". taking SS at 62 (assuming it is 75% of FRA) should drop that rate to about 0.857%/yr of additional wages, which makes your average yearly wage over that 15 yrs: ~$2900/yr (indexed). this was a quick analysis and hopefully i didnt miss anything.

Yes, my definition of part time was just menial work. I noticed that those earlier years were late 70's and 80's minimum wage part time jobs that vested me my quarters needed. We are talking about 2k-3k a year. I just put in 5k a year for substitute teaching that I do to fill in the years. I figured that would double it, since I was more than doubling the years worked, but obviously that is wrong. My pension is such, that it took away the maximum amount. I wasn't really counting on anything, and it turns out that is about what I'm going to get!

 

[jdw_fire]

...
However from a quick look at the SS estimator, it looks like this doesn't make much difference at all. If I tell it I'm going to work another 12 years, and earn 50% more per year than I have in the past, my benefit only goes up 4%. If my earnings *double*, it only goes up 8%!!! If I tell it I'm going to earn 1/4 as much as I have been, my SS benefits only drop 6%.

So for SS benefits anyway, it appears how much you earn for the last N years of your working career doesn't make a damn bit of difference.
...

well that depends on how much total income you earned early in your career (i.e. prior to your "last N years"). if you already earned $1,897,140 (all earned income amounts in this post are indexed and all SS benefit #s are at FRA) in your career prior to those "last N years" then for each $10,000 of earned income in those "last N years" your yearly SS benefit will go up by about $42 (until you have 35 years of work in your career, then it will be even smaller) which is an increase of 0.177% of your yearly SS benefit. but if your earnings in your career before the "last N year" is < $314,580 (lets say $300,000 for this example) then if you earn $10,000 of income in those "last N years" your yearly SS benefit will go up by about $257 (unless you have >35 years of work in your career, then it will be smaller), which is a 3.37% increase. this later percentage is 19 times larger than the earlier 1. so the percentage of increase in SS benefit for additional work can vary widely depending on how much total earned income has already been earned. btw for any given person, it may be more complicated than either of these 2 examples.

 

[Fireup2020]

Great link! Data was somewhat depressing! The online calculator was different from last year's mailout (pending my working to FRA - HA!) by a noticeable difference - oh well, looking at about $1K per month if I ever even get to receive SS!! (fortunately not a factor in our FIRE calculations!)

 

[martyb]

This thread motivated me to check my SS benefits. I am under the WEP. I worked part time for about 12 years starting in HS. I will get $99 a month at 62. What I thought was odd was that I could work part time for the next 15 years until 62, and it would raise only to $130 a month! Definitely am not going to work part time for the increased SS benefits!

I'm a WEP'er too, having been a federal employee & not paying into SS from that job since 1982. I did, however, pay into SS between 1973 & 1982, so I basically qualify to get some SS, which I've calculated to be in the $250 - $300 range at age 62 (8 yrs from now). What bugs me a little is that although I stopped paying into SS from my civilian job in 1982, I have paid into SS from my military reserves pay for all of those same years (1981-2010), but will get nothing in return from those contributions, because I didn't earn enough to reach the minimum threshold. I don't think that's fair. I realize I shouldn't get the same as somebody who's paid in much more, but I feel like I oughta get something for that 30 yrs of contributing. The amount I will get is based solely on my earnings prior to the end of 1982, nothing afterwards.

 

[Mulligan]

I'm a WEP'er too, having been a federal employee & not paying into SS from that job since 1982. I did, however, pay into SS between 1973 & 1982, so I basically qualify to get some SS, which I've calculated to be in the $250 - $300 range at age 62 (8 yrs from now). What bugs me a little is that although I stopped paying into SS from my civilian job in 1982, I have paid into SS from my military reserves pay for all of those same years (1981-2010), but will get nothing in return from those contributions, because I didn't earn enough to reach the minimum threshold. I don't think that's fair. I realize I shouldn't get the same as somebody who's paid in much more, but I feel like I oughta get something for that 30 yrs of contributing. The amount I will get is based solely on my earnings prior to the end of 1982, nothing afterwards.

Although the WEP is hitting me fairly, I don't think it is to people like you who had other full time jobs for significant time. For several years there has actually been organized efforts to get the WEP repealed. With the impending shortfall of SS looming, I see little chance of the repeal getting any traction.

 

[Rustward]

I'm a WEP'er too, having been a federal employee & not paying into SS from that job since 1982. I did, however, pay into SS between 1973 & 1982, so I basically qualify to get some SS, which I've calculated to be in the $250 - $300 range at age 62 (8 yrs from now). What bugs me a little is that although I stopped paying into SS from my civilian job in 1982, I have paid into SS from my military reserves pay for all of those same years (1981-2010), but will get nothing in return from those contributions, because I didn't earn enough to reach the minimum threshold. I don't think that's fair. I realize I shouldn't get the same as somebody who's paid in much more, but I feel like I oughta get something for that 30 yrs of contributing. The amount I will get is based solely on my earnings prior to the end of 1982, nothing afterwards.

WEP in this house, too. How does the combination of your pension and SS compare to what you would get from SS if you had been in the private sector your whole career? ... to the pension if you had been in the public sector your whole career?

 

[explanade]

WEP?