Maximizing Social Security Benefits

[eyenitnoy]

Hello Everyone:

* * *One component of my early retirement plan deals with social security.* While I am not using any Social Security money to fund my retirement plan, I nonetheless do want to attempt to maximize the amount of social security benefit I receive.* My goal is to receive the maximum benefit possible, given the current rules, without having to work "excess" years paying into the system when such payments will either not increase, or only slightly increase, my potential retirement benefit.* In fact, just how my benefit changes with added contributions could convince me to work an extra year or two if such contribution would have a substantial effect on my retirement benefit.* I am having, however, a hard time getting a sense of just how much of a benefit I will receive once I retire given my earning history.* While I do receive the annual social security statement that gives a projection, given the fact that I plan to retire early I don't know how accurate this statement really is.* And I have looked at the social security website and some other links.* But I still do not have a good sense that I am accurately projecting my potential social security benefit.* Party, this is because of my peculiar earning history.* *Because of a long period of grad. school, I started earning money relatively late in life.* I have about five years of earnings that are very modest indeed, with some social security money being withheld, but not a particularly large amount.* Following this, I have an eleven year (and counting) period where I have had the maximum annual social security contribution deducted from my earnings.* I anticipate that when I retire I will have paid the maximum level of withholding for a period of some 17 or 18 years in a row.

* * *So, getting to my question.* Will 17 or 18 years of maximum social security withholding get me close to the maximum benefit that I would receive even if I worked many extra years and continued to have the maximum and ever rising social security tax withheld?* (Also, as I mentioned, there were some minor earning years prior to this.)* Or, will my benefits be greatly reduced because I retired in my late 40's as opposed to working until my full retirement age of 67, or at least a few years closer to said full retirement age?* Does anyone have a general sense of "how close" I will be to the maximum benefit given these data?* Does anyone know of any sort of calculator or data base that can give me a more precise estimate?* I do have the actual dollar amounts withheld for each year I earned income, so I could plug that data in easily enough.* I am really interested in knowing this number.* While, as I said, I am not using Social Security as a component of my retirement nest egg calculations-I will work until I have a large enough nest egg without social security-I feel that knowing this number is important.* My plan is to wait until age 70 and then draw whatever amount of social security I can to act as an additional "annuity payment" in the event I live to be very, very old. This acts as an extra safety cushion for me in case my nest egg calculations are wrong and I deplete my nest egg even having drawn only 3 to 4% starting in year one of retirement.* And, truthfully, knowing this number will help give me the courage to retire early.* Even with an appropriate nest egg, I will worry.* Knowing there is a grand or two coming monthly somewhere down the road will help me psycologically.* *That is likely the biggest return I will get from social security.

* * *Thanks in advance for any input on the benefit calculation or other thoughts and comments.

Best Regards,
eye

[REWahoo]

Quote:

Originally Posted by eyenitnoy Does anyone have a general sense of "how close" I will be to the maximum benefit given these data? Does anyone know of any sort of calculator or data base that can give me a more precise estimate?

http://www.ssa.gov/planners/calculators.htm

[samclem]

eyenitnoy,
The calculator should give you all te answers you need. SS provides considerably higher "payback" for lower-wage earners. When I ran the numbers for my particular situation, each additional year I work (and pay thousands in SS tax) produces a gain of 10-30 dollars per month in my expected SS check. I think you'll be underwhelmed by the SS impact of working longer.

[alphabet soup]

Eyeitnoy,

I would seriously reconsider putting additional years into the rat race if you don't have to based on "pie in the sky " promises of the U.S. Congress.

When you have accumulated sufficient funds to pay your own way, sans SS benefits, go for it.

Waiting until age 70 to collect is OK in theory, I guess, but I don't have any faith in the morally and ethically challenged dirtbags who make, and remake, federal laws.

It wouldn't surprise me at all to see Roth IRA holders, for example, get f**ked out of their tax exemptions. All it would take is a catastrophic, unmanageable budget deficit situation.

[bosco]

Quote:

Originally Posted by alphabet soup It wouldn't surprise me at all to see Roth IRA holders, for example, get f**ked out of their tax exemptions. All it would take is a catastrophic, unmanageable budget deficit situation.

please....no Bush-bashing on this forum!!

[alphabet soup]

Quote:

Originally Posted by bosco please....no Bush-bashing on this forum!!

Bush I was speaking of all, or mostly all, of our so-called elected representatives in congress.

Bush &Co. just happen to be the worst of the lot. :P

[New Thinking]

The link that REWahoo posted sends you to the SSA site and one option is to input all of your actual earnings (from your annual statement) and you can project your future earnings. Basically, your SS is based on your best 35 years. So if you have no income for some years, you get a zero. You have to check your own..And remember that the calcs are in "Today's Dollars"..They will grow prior to your age 60 with "wage inflation" which has been historically over 4%..From age 60 on, it is CPI inflation.

As I have posted before, delaying to age 70 will make sense for many. Other than the markets themselves, retirees have to worry about inflation, investment expenses and taxes..Social Security income wins hands down compared to IRA income on all three.

Many don't trust the government with SS and I respect that opinion..But to me, there is a much greater chance that IRA income gets hurt by government more than SS..Baby boomers will need SS, so it will be difficult to cut SS for those at or near retirement..What is far more likely is that ordinary tax rates go up (to pay for projected deficits) which will bring down the value of IRA income..Inflation will likely increase too as the government can always print money.

[mathjak107]

my best guess is no political group or elected politician will ever tell the almost 80 million baby boomers they are raising their tax rate...i just dont see that happening...i do see social security taxes and medicare taxes sky rocketing for the working stiffs though..i do see higher inflation and larger defecits

[d]

Quote:

the government can always print money

the gov't can borrow and tax, but cannot just "print money".*

[haha]

Quote:

Originally Posted by d the gov't can borrow and tax, but cannot just "print money".*

Not quite. The treasury can issue debt, and the Federal Reserve can step up its purchases of government debt with money it creates out of thin air. Pretty close to just printing money, IMO.

Ha

[mathjak107]

they actually do creat money where there is none..its built into the federal reserve banking system.they have lots of different ways of doing it....
for 1 example ,,,you borrow 100,000 for some home renovations,,you put the money in your checking account so you can store it until you need it...the banking system has credited the their member bank *for the loan as an asset at 100,000 as well as the deposit...a total of 200,000 of which depending on the banking reserves at that time can loan out up to 90% of that amount....

[Nords]

Quote:

Originally Posted by New Thinking As I have posted before, delaying to age 70 will make sense for many. Other than the markets themselves, retirees have to worry about inflation, investment expenses and taxes..Social Security income wins hands down compared to IRA income on all three.

Gotta do your own math. Run FIRECalc assuming you receive SS at age 62, and then run it again assuming you wait until age 67 (or 70) and check the portfolio survival rates. You may becide that grabbing the money & running is the best approach.

But your spouse will appreciate your waiting until as late as possible in order to maximize her survivor's benefits.

Quote:

Originally Posted by New Thinking What is far more likely is that ordinary tax rates go up (to pay for projected deficits) which will bring down the value of IRA income.

Yet another reason to consider a Roth IRA conversion.

Quote:

Originally Posted by d the gov't can borrow and tax, but cannot just "print money".

As I understand it, the Treasury can barely keep up with the demand!

I wonder what percentage of the printing & minting output is mounted by coin/bill collectors, hidden in safe deposit boxes, or tucked into mattresses.

[mathjak107]

using fidelitys sophisticated retirement planner i ran a few scenerios...in all cases as long as either my wife or i made it to 81 we were ahead taking the money later...if we didnt increase withdrawls to take adventage of the additional amount compared to 62 the best case scenerio was an additional 50,000 on on origional amount of 1.5 million in assets.....we decided 50,000 on a potential 3 million nest egg in 30 years wasnt worth waiting for,....50,000 in 30 years may be like 10,000 today....id rather take the money at 62 and enjoy it while we can

[d]

Quote:

money it creates out of thin air

"printing money" suggests the "creation" of an asset ... when the fed "creates" money, there is a corresponding increase in liabilities ... not at all like "printing" money.* if it were as easy as simply turning on the printing press, you can be assured that the deficit would disappear and taxes would be dramatically decreased, and congress would, of course, take credit for all their hard work.

[Billy]

mathjak107,
Whenever I hear of or read these debates regarding taking SS now or later, I am reminded that just because you take it, doesn't mean you have to spend it. What if you took it at 62 and invested the money? You might be better off.

Billy
RetireEarlyLifestyle.com

[mathjak107]

the numbers that we ran already assumes that....you have to rember that if you dont spend the ss check you have to pull the money from the other pocket to meet your living expenses...either way you end up with the same amount invested and the same amount spent....fidelity assumes that whatever money you pull to meet your monthly nut gets invested back the same way and at the same rate as your overall portfolio.......unless your spouse will have a hard time making ends meet without your full ss check my vote is grab it early and enjoy it.

[mathjak107]

the only people who wouldnt have to worry about do i bank the ss check or pull the money out of the bank or ira's are people with a pension that pays all monthly bills

[Billy]

If your already FIRE'd, you really do not "need" SS, right? So, I agree, take the money and run.

Billy
RetireEarlyLifestyle.com

[mathjak107]

well lets suppose your monthly bills are 2500.00.....if you* take your ss check and deposit it..you still need to pay the bills from somewhere.....you can pay your bills with the ss check and not touch your ira's or bank accounts or deposit the ss checks and touch your ira's or bank accounts..either way its a wash..there really is no such thing as "investing your ss checks " as it just comes from the other pocket........

[MJ]

Quote:

Originally Posted by Billy mathjak107, Whenever I hear of or read these debates regarding taking SS now or later, I am reminded that just because you take it, doesn't mean you have to spend it. What if you took it at 62 and invested the money? You might be better off. Billy RetireEarlyLifestyle.com

There was a thread that described taking your SS payments at 62 and if you don't use/need it, giving it back 3 years later so you can then apply for SS at a higher rate. This way you get to invest the borrowed money and then return the principal.