The settings below shows effect of assumed future inflation on the benefit. The software allows you to adjust the future inflation numbers on benefits and average-wage increases.
I like this tool.
Calculating Social Security Retirement Benefits
- Thread starter G-Man
- Start date
The settings below shows effect of assumed future inflation on the benefit. The software allows you to adjust the future inflation numbers on benefits and average-wage increases.
I like this tool.
G-Man,
Why worry so much about the SS benefit amount 6 years before you turn 62 and are eligible for early SS? As the SSA site states "estimated future percentage increases in the national average wage index (AWI)." It is an estimate, not actual guaranteed benefits at this point in your life. SSA won't know actual index factors until they calculate the average wage for the US for each of the next 6 years. Accuracy is not that exact 6 years early. Benefit amount won't match to the dollar until you reach 62 once they have the actual wages from the next 6 years of tax returns. If you are assuming best case scenarios and no room for error in your financial plans, then you will be in for a rude awaking in the future. Do what I did, assumed SS was used for part of my discretionary money and conservatively estimate market returns for my basic needs.
Why worry so much about the SS benefit amount 6 years before you turn 62 and are eligible for early SS? As the SSA site states "estimated future percentage increases in the national average wage index (AWI)." It is an estimate, not actual guaranteed benefits at this point in your life. SSA won't know actual index factors until they calculate the average wage for the US for each of the next 6 years. Accuracy is not that exact 6 years early. Benefit amount won't match to the dollar until you reach 62 once they have the actual wages from the next 6 years of tax returns. If you are assuming best case scenarios and no room for error in your financial plans, then you will be in for a rude awaking in the future. Do what I did, assumed SS was used for part of my discretionary money and conservatively estimate market returns for my basic needs.
Al18
Full time employment: Posting here.
Don’t forget to cut the estimated SS benefit by 25%, to account for SS only being able to pay for 75% of estimated benefits by 2034.
Ok. I will use the SS benefit numbers for 2022 in my retirement planning. That should be conservative enough.
Thanks
As oldtimer responded, there is no way to know future indexing multipliers to calculate an AIME for 6 years from now. You can only get the future estimate in todays dollars, based on the projection of future earnings and assuming no COLA. That video is trying to prepare younger future recipients that the difference in todays dollars is greater every year you are farther from collecting. The maximum AIME goes up every year. It may very well be $13000 once the OP is 62. Or it might not. When I started getting SS estimates in my 20s, I though “What a joke, who can live on that, especially by the time I am 65?” Of course, I didn’t comprehend the double compounding of increased earnings as well as COLA from inflation. As it turns out, based on what information was available to SSA, if I take my earliest SS letter, and simply plug in what the “then” dollars was to calculate for today, and the assumption that I only earned the inflated rate of what I was earning back then, the estimate was very close. Of course, the rules changed a few times and so did the SS premiums. But bottom line, at 4 months shy of 65, my estimate for age 70 SS if I file then, is about $50k/yr in TODAYS dollars, so it could easily be $55K by then. WAY WAY more than I understood it to be as a dumb 28 year old know it all.
Certainly, when I retired at 61, there was no consideration that in the next few years we would see two consecutive years, at least, of 8% + inflation!
Certainly, when I retired at 61, there was no consideration that in the next few years we would see two consecutive years, at least, of 8% + inflation!
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Thanks for responding.
My wife will be receiving her SS benefits in 3 years at age 62. I am trying my best to estimate her SS benefits at 62 using the future indexing factors and the future bend points.
No so much worry about my SS benefits because I plan to wait until 70 (14 years from now) to collect my benefits.
However, I would like to enter accurate data in my planning software (NewRetirement Planner +) as possible.
Honestly, the age 59 projection from SSA for early file @ 62 will be very close for something like that, as long as she has 35 years of earnings. If she has some zeros in there, and those will be replaced, then it will be somewhat higher, but not as much as you would hope the increased AIME would make it. .You can increase it based on what you believe her earnings ( if working) & SS COLAs will be, or be more conservative and go with their estimate. Forget about bend point advances. The difference is negligible compared to COLA for the next 3 years.
For my wife, if I do the calculation manually or use the the Social Security Desktop app, there is a $300 per month difference if I use the 2022 indexing factors and bend points versus the 2025 indexing factors and future bend points.
I'm I doing something wrong? My manual calculation and the calculation in the Security Social desktop app for future indexing factors and bend points are spot on.
So for my wife, there is a $300 difference per month.
My wife has 43 years of earnings. I realize that only the top 35 earning years is included in the AIME calculation.
jazz4cash
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I am not too interested in a detailed calculation but using the calculator on mySS site, I am surprised the estimate does not change from month to month. I can input a date (mo/yr) or an age (yrs/mos) to start my benefit but the amount only changes every 6 months or so. Doesn’t the amount go up every month I delay?
You can go to ssa.gov and establish your "My SS" account. Once established, you will see a record of your earnings (and verify it is correct) plus an estimate of your benefit.
Logging on and verifying your record of earnings is very important. There was one case where the accounting firm for a company embezzled funds and never submitted SS records/taxes. One man did not find this out until he went to apply for SS and found out that none of his working years had been recorded for SS benefits (what a mess). Until that is straightened out, he cannot file for his SS benefit.
Another reason to set up that account is to thwart someone stealing your identity and signing up for your benefits. Plus there was another recent case where a man had printed out his earnings record yearly. But this year when he went to his account, some of the years had been zeroed out. He and his advisor are still working with the SSA to get this corrected.
Your SS benefit is calculated on your "top 35" earning years with each year up to age 60 indexed for inflation. So if you are near/over 60, unless you had several years gap in employment or entered the workforce late, your current/future income probably will make little/no difference in that calculation.
The one thing the Estimated Benefit chart does NOT have is an estimate of any future COLAs. So the estimates in future years would be the minimum amount you would get if you filed.
Logging on and verifying your record of earnings is very important. There was one case where the accounting firm for a company embezzled funds and never submitted SS records/taxes. One man did not find this out until he went to apply for SS and found out that none of his working years had been recorded for SS benefits (what a mess). Until that is straightened out, he cannot file for his SS benefit.
Another reason to set up that account is to thwart someone stealing your identity and signing up for your benefits. Plus there was another recent case where a man had printed out his earnings record yearly. But this year when he went to his account, some of the years had been zeroed out. He and his advisor are still working with the SSA to get this corrected.
Your SS benefit is calculated on your "top 35" earning years with each year up to age 60 indexed for inflation. So if you are near/over 60, unless you had several years gap in employment or entered the workforce late, your current/future income probably will make little/no difference in that calculation.
The one thing the Estimated Benefit chart does NOT have is an estimate of any future COLAs. So the estimates in future years would be the minimum amount you would get if you filed.
Well, my wife is 3 years from age 62. Her SS benefit statement on the SSA.gov site does not reflect the future indexing factor and the future bend points. As well as the COLA from 60 to 62. Critical components in calculating your Social Security benefits. I'm estimating a $300 difference from what is on the SSA.gov site and what is calculate using the Social Security desktop app.
Is anything else seeing this as well?
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MissMolly
Thinks s/he gets paid by the post
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There is no COLA for age 60 and 61. COLAs don't apply until age 62. For 60 Average Wage Indexing is used. For age 61 there is no index or COLA used. Beginning with age 62 and after COLAs apply.
Thanks for the correction.
For my wife, 1988 - 2022 is her Top 35 earning years. She plans to retire in 2023 at age 60 and take SS benefits at age 62 in 2025.
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2retireearly
Recycles dryer sheets
There is acap
Because there is a cap on the amount of income that
social security will pay out on, then of course there is a maximum benefit that could be paid out monthly. as of 2022, this amount is 3345.
So if someone made a million dollars for the last 35 years, at FRA, theywill only get 3345. If someone made 120k for the last 35 years, at FRA, they will only get 3345....The incremental changes,due to the complicated formula are tiny, per month. So if many years you didn't make the max amt that soc sec is based on,then you might get 3200 per month..or 3300 per month.
So I'm not sure what you are seeing..just look at the soc sec statement. It shows your annual income capped at the soc sec cap, and then benefit that will pay, at 62,FRA and at 70. The calcs are correct.
Because there is a cap on the amount of income that
social security will pay out on, then of course there is a maximum benefit that could be paid out monthly. as of 2022, this amount is 3345.
So if someone made a million dollars for the last 35 years, at FRA, theywill only get 3345. If someone made 120k for the last 35 years, at FRA, they will only get 3345....The incremental changes,due to the complicated formula are tiny, per month. So if many years you didn't make the max amt that soc sec is based on,then you might get 3200 per month..or 3300 per month.
So I'm not sure what you are seeing..just look at the soc sec statement. It shows your annual income capped at the soc sec cap, and then benefit that will pay, at 62,FRA and at 70. The calcs are correct.
I hadn’t read much about this until now.
Almost 10 million people receive SSDI (primary + spouse + children)
About 78 million projected to receive SS (OASI) by 2035
Plus medicare…
So, direct impact to almost 25% of the 2035 US population.
I can’t IMAGINE the suffering and deaths that a 25% reduction in monthly ss would cause to this country. Everyone would be impacted, I would think. Every child and adult has or had parents, grandparents, aunts, uncles, disabled friends and relatives.
I really hope this is resolved sooner rather than later!
CRLLS
Thinks s/he gets paid by the post
Probably not what the OP wants but here it goes. There is no way of knowing with any degree of certainty. Future pay, SS COLA, etc affects both SS and your expenses. I always used the annual SS report and figured everything in today's dollars. When the job left me, some fine adjustments were used to calculate my/our benefits as there was no more income. Using AnyPIA was close enough for us to plan, knowing there was some degree of error. How much? No way to "know". If the budget is that close that you need to know down to the last few dollars, then maybe there needs to be some buffer added in. 3 years and 12 years in the future, is a long way away for any degree of accuracy.
The old saying of "Measure with a micrometer. Mark with chalk. Cut with an axe." seems appropriate here. The "Cut with an axe" is the end result when SS checks start coming in.
The old saying of "Measure with a micrometer. Mark with chalk. Cut with an axe." seems appropriate here. The "Cut with an axe" is the end result when SS checks start coming in.
Thanks for the input. For planning purposes, I will use what's on the SS report for my wife and I SS benefits.
I am 65 yrs. old and when I access my account on SSA.gov, it indicates I do have all of my credits. My FRA will of course be on my birthday next summer.....should I wait until then (after my next birthday) to apply for my full social security?
As it stands right now, they are not wanting to offer me much in monthly social security if I were to apply at this moment. I can afford to wait, as I am self-employed and have a credit card.
I have always filed my income taxes each year as a "sole proprietor" and have paid into the system and have done so using some very knowledgeable CPA's. Although when asking them questions about this in the past, it has always resulted in the proverbial "deer in the headlights".
Any insights, feedback, constructive criticism is appreciated.
As it stands right now, they are not wanting to offer me much in monthly social security if I were to apply at this moment. I can afford to wait, as I am self-employed and have a credit card.
I have always filed my income taxes each year as a "sole proprietor" and have paid into the system and have done so using some very knowledgeable CPA's. Although when asking them questions about this in the past, it has always resulted in the proverbial "deer in the headlights".
Any insights, feedback, constructive criticism is appreciated.
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If you are currently 65 and your birthday is in the summer, then I assume you were born in about June 1957. If so, your Full Retirement Age is actually 66 years and 6 months, not your 66th birthday (i.e. December 2023) When you fill out your paperwork, you will tell them when you want to start getting benefits. You can file that application up to four months in advance. You get paid a month in arrears, so if you say you want to start benefits when you are 66 and 1/2 years old and that occurs in December, you don't actually receive a check until sometime in January.
Also, if you are currently 65 years and 3 months old, waiting another 15 months will only increase your monthly benefits by 8.3%. So if it is "not much" right now, it will only be 1.083 of "not much" next year.
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Appreciate your in-depth response! I have been trying to understand my predicament for the longest time and I do understand you as your response seems 100% on-target, although my 66th will be on July 21 of next summer.
I do have Medicare right now and signed up a few months before my 65th (within the so-called window), this summer. Unbeknownst to me I received my first invoice from Medicare for $510.00 this past summer, paid that and this past September, received my second invoice for $510....which I paid immediately....have been paying them electronically using my CC (simpler and quicker).
I will expect their next invoice beginning of 2023 I think. I was also offered Medicare PLUS Blue PPO Blue Cross / Blue Shield of Michigan and have that in conjunction with Medicare (for now).
Mind you I have no underlying conditions, have never been hospitalized, do not have a family doctor and have never smoked.....been a distance runner since my early thirties also.
But when I was on the site and signing up for Medicare, I was on an 800 line talking to one of the Medicare people and asked her about this exact predicament....she said in a condescending manner "well, my dad signed up and never got much social security because he was self-employed....etc." That left me with a feeling of disdain and negativity. Maybe there was no "minimum social security benefit" at the time her dad was retiring and it indicated most of those people are oblivious to the needs of retirees or those of us entering certain age brackets.
Having said this, I still am curious as to what you think my next step(s) would be...should I wait until the beginning of 2023 (and do any due diligence in advance)? Is there a link on SSA.gov where one would go to acquire additional information regarding how to begin the process to get the minimum social security benefit? I'm certain contacting someone verbally at SSA would not get me anywhere based on my conversation with the lady last spring when I began the process to get on Medicare. As I say, I felt as though she was talking down to me. Any additional insights will be gratefully appreciated.
I do have Medicare right now and signed up a few months before my 65th (within the so-called window), this summer. Unbeknownst to me I received my first invoice from Medicare for $510.00 this past summer, paid that and this past September, received my second invoice for $510....which I paid immediately....have been paying them electronically using my CC (simpler and quicker).
I will expect their next invoice beginning of 2023 I think. I was also offered Medicare PLUS Blue PPO Blue Cross / Blue Shield of Michigan and have that in conjunction with Medicare (for now).
Mind you I have no underlying conditions, have never been hospitalized, do not have a family doctor and have never smoked.....been a distance runner since my early thirties also.
But when I was on the site and signing up for Medicare, I was on an 800 line talking to one of the Medicare people and asked her about this exact predicament....she said in a condescending manner "well, my dad signed up and never got much social security because he was self-employed....etc." That left me with a feeling of disdain and negativity. Maybe there was no "minimum social security benefit" at the time her dad was retiring and it indicated most of those people are oblivious to the needs of retirees or those of us entering certain age brackets.
Having said this, I still am curious as to what you think my next step(s) would be...should I wait until the beginning of 2023 (and do any due diligence in advance)? Is there a link on SSA.gov where one would go to acquire additional information regarding how to begin the process to get the minimum social security benefit? I'm certain contacting someone verbally at SSA would not get me anywhere based on my conversation with the lady last spring when I began the process to get on Medicare. As I say, I felt as though she was talking down to me. Any additional insights will be gratefully appreciated.
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I'm sorry you will ill-treated by the person you spoke with. We should expect better from our public servants. It is possible that she was confused or misinformed about her father's situation.
Your social security benefit at full retirement age is called your Primary Insurance Amount (PIA), which is calculated based on your average indexed monthly earnings (AIME). Basically, that takes the reported earnings from when you were 16 and adjusts them for inflation to when you were 60. And from when you were 17 and every year thereafter. After inflation adjusting each years earnings, they take the 35 highest amounts and average them to get the AIME. Then, they calculate your PIA, which is 90% of the first $1024 dollars of AIME plus [-]40[/-]32% of the amount of AIME between $1024 and $6172 plus 15% of the amount of AIME over $6172. So, for example, if your average AIME as of 2022 was $7000, your PIA would be (0.9 x 1024) + (([-]0.4[/-]0.32 x (6172 - 1024)) + (0.15 x (7000 - 6172)) = [-]$3105[/-] $2693. Your particular PIA was determined the year you turned 60, back in 2017, so the actual calculation would use the "bend point" numbers from then ($1024 and $6172 in the above equation are the bend points in 2022; they were lower in the past.) But you get the idea.
So, social security depends entirely on how much earned income was reported to the Social Security Administration over the years you were working and paying social security taxes. It is irrelevant whether that income was from self employment income reported on a Form SE or employee wages reported on a W2. It all goes into the AIME calculation.
There is a special minimum social security benefit for people who reported low wages/self employment income over the course of their working life. In 2017, the year your PIA was determined, that special benefit was $848 per month as a PIA (if you had worked 30 years). That amount will have increased by the social security COLAs for 2019 through 2022, so it ought to be about $1000 by next year when you reach full retirement age. https://www.ssa.gov/OACT/ProgData/tableForm.html See also https://smartasset.com/retirement/minimum-social-security-benefit
I don't know that there is a specific process that you would need to go through to get the special minimum benefit. I expect that you would just go ahead and apply for a social security benefit and they would simply apply the special minimum benefit amount if the calculation based on your reported earnings was lower than that. But, again, I really don't know.
This post has been corrected to get the math right
Your social security benefit at full retirement age is called your Primary Insurance Amount (PIA), which is calculated based on your average indexed monthly earnings (AIME). Basically, that takes the reported earnings from when you were 16 and adjusts them for inflation to when you were 60. And from when you were 17 and every year thereafter. After inflation adjusting each years earnings, they take the 35 highest amounts and average them to get the AIME. Then, they calculate your PIA, which is 90% of the first $1024 dollars of AIME plus [-]40[/-]32% of the amount of AIME between $1024 and $6172 plus 15% of the amount of AIME over $6172. So, for example, if your average AIME as of 2022 was $7000, your PIA would be (0.9 x 1024) + (([-]0.4[/-]0.32 x (6172 - 1024)) + (0.15 x (7000 - 6172)) = [-]$3105[/-] $2693. Your particular PIA was determined the year you turned 60, back in 2017, so the actual calculation would use the "bend point" numbers from then ($1024 and $6172 in the above equation are the bend points in 2022; they were lower in the past.) But you get the idea.
So, social security depends entirely on how much earned income was reported to the Social Security Administration over the years you were working and paying social security taxes. It is irrelevant whether that income was from self employment income reported on a Form SE or employee wages reported on a W2. It all goes into the AIME calculation.
There is a special minimum social security benefit for people who reported low wages/self employment income over the course of their working life. In 2017, the year your PIA was determined, that special benefit was $848 per month as a PIA (if you had worked 30 years). That amount will have increased by the social security COLAs for 2019 through 2022, so it ought to be about $1000 by next year when you reach full retirement age. https://www.ssa.gov/OACT/ProgData/tableForm.html See also https://smartasset.com/retirement/minimum-social-security-benefit
I don't know that there is a specific process that you would need to go through to get the special minimum benefit. I expect that you would just go ahead and apply for a social security benefit and they would simply apply the special minimum benefit amount if the calculation based on your reported earnings was lower than that. But, again, I really don't know.
This post has been corrected to get the math right
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So if my wife turns 60 next year, the indexing factors and bend points for her SS benefits would be based on year 2021. If she takes SS at age 62 (2025), would COLA increase be used for year 2022, 2023, and 2024?
So, if my wife turns 62 in 2025 and take SS benefits at that time, what indexing factors would be used to calculate her PIA (age 67) based on this SS URL below?
What year would I enter?
https://www.ssa.gov/OACT/COLA/awifactors.html
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No, the PIA is determined using the data in the year you turn 60, so in your wife's case, 2023. COLAs don't get applied to PIAs until the year you turn 62. There is no COLA or inflation adjustment for the year you turn 61. So her PIA will be determined as of 2023. She will not get the COLA that is effective as of December 2022 (but the average wage index used to calculate the AIME in 2023 will have increased at roughly the same rate as the CPI-W for 2022), nor COLA or other inflation adjustment in 2024. The first COLA that will increase her PIA is the one effective December 2025.
Enter the year 2023 in the calculator you link.
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So these are the indexing factors I should be using to calculate her PIA. Then reduce by 30% to get SS benefits at age 62.
Indexing factors
Year Factor
1962 13.6885562
1963 13.3609006
1964 12.8363117
1965 12.6092725
1966 11.8952587
1967 11.2676218
1968 10.5430008
1969 9.9669939
1970 9.4957632
1971 9.0414571
1972 8.2344711
1973 7.7495818
1974 7.3147585
1975 6.8061192
1976 6.3667910
1977 6.0067928
1978 5.5648828
1979 5.1172329
1980 4.6943907
1981 4.2650580
1982 4.0425088
1983 3.8547244
1984 3.6407075
1985 3.4919325
1986 3.3912759
1987 3.1879651
1988 3.0383236
1989 2.9226062
1990 2.7935670
1991 2.6932032
1992 2.5612380
1993 2.5393986
1994 2.4730249
1995 2.3777171
1996 2.2668556
1997 2.1418752
1998 2.0353479
1999 1.9279087
2000 1.8268823
2001 1.7843148
2002 1.7665978
2003 1.7244432
2004 1.6478390
2005 1.5896724
2006 1.5198170
2007 1.4538392
2008 1.4211470
2009 1.4429071
2010 1.4095913
2011 1.3667660
2012 1.3253803
2013 1.3086540
2014 1.2637941
2015 1.2213044
2016 1.2076578
2017 1.1673463
2018 1.1265158
2019 1.0858240
2020 1.0559868
2021 1.0000000
2022 1.0000000
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I believe they also include the wages you earn the year you turn 60, so you won't actually know until next year. If I wanted to be conservative, I would just use 1.00 for 2023 as well. But I will repeat what others have said - if the AIME indexing factor for 2023 makes a difference in your plan, you're cutting it too close.
