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SS benefit amount question...
Old 03-07-2021, 05:50 PM   #1
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SS benefit amount question...

Hi folks, trying to get some clarity on an estimated benefits question which a friend is confusing me about.

I will be 63 in April. SSA estimated my monthly payout at approx. 1510 if I took SS at 62., and 2082/month at age 66. (2638/mo at 70).

I'm a sole proprietor and have scaled back pretty substantially on work income as of this year. My friend says that if I continue to show income from this point forward, it could lower the estimated benefits amount(s) depending on how much the income per year figure might be.

I guess he means it could skew the overall lifetime income average that the aforementioned estimated benefits are based on. IOW if I earn significantly less per year than my established annual earned income average for 2 or 3 more years before I might take SS at 66, could that significantly lower the averaged income and the current SSA's projected estimated benefits.

Hope this Q make sense. Guess I could call SS but figured someone here might've already dealt with this and could explain.

Thanks!
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Old 03-07-2021, 06:17 PM   #2
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I don't think you friend is right. Is based on your best 35 years, so it can't hurt you.

"Social Security benefits*are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then*Social Security*calculates your average indexed monthly earnings during the 35 years in which you earned the most."
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Old 03-07-2021, 06:19 PM   #3
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As far as I understand it, your friend is wrong.

Your SS benefit is based on the average of your highest 35 years of earnings (adjusted for inflation somehow).

If your income going forward is not among the highest 35 years of earnings, then your benefit will not go up.

If your income going forward is among the highest 35 years of earnings, then your benefits will go up, but probably only very slightly.

...

Your SS benefit estimates that you see on the website do assume that you continue working from now until you claim SS at the last income level that the IRS passed along to the SSA, which is a year or two ago. (You can see exactly what the last reported income is in your SS work history online, I'm fairly certain.)

If you stop working or have an income which is significantly lower than what you made last year or the year before, then that in theory could cause your actual benefit to drop. But this is simply because of the SS estimate catching up with reality, not with any adverse impact of you working a low income year. And in general, for someone who has been working as long as you have, this drop might only be $10 a month or something silly like that.

There are SS calculators where you can "fill in" your last year or two worth of work with your earnings and see what it does to your benefit. Someone else will come along and provide those. I think one is called any PIA or something like that.
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Old 03-07-2021, 06:24 PM   #4
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Beat you by 2 minutes SecondCor!
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Old 03-07-2021, 06:28 PM   #5
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Your friend is way off base.
Perhaps he is referring to the concept that if one earns monies while they collect SS before full retirement age, then the SS is temporarily reduced, but you get it back.
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Old 03-07-2021, 06:34 PM   #6
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For the best SS calculator go to Post #2 at https://www.early-retirement.org/for...lp-108166.html.

Thank you MissMolly!
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Old 03-07-2021, 07:42 PM   #7
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Beat you by 2 minutes SecondCor!
I typed more!
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Old 03-07-2021, 08:04 PM   #8
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That you did. Brevity prevails!
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Old 03-08-2021, 06:20 AM   #9
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For the best SS calculator go to Post #2 at https://www.early-retirement.org/for...lp-108166.html.

Thank you MissMolly!

That is an excellent tool with good graphs etc.
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Old 03-08-2021, 07:52 AM   #10
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Highest 35 with inflation adjustments (indexed earnings) is my understanding.
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Old 03-08-2021, 10:21 AM   #11
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Highest 35 with inflation adjustments (indexed earnings) is my understanding.

Yes and indexing stops at age 60. So any income earned after 60 is not indexed
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Old 03-08-2021, 02:17 PM   #12
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Yes and indexing stops at age 60. So any income earned after 60 is not indexed
Can you explain what this means ? thanks
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Old 03-08-2021, 02:47 PM   #13
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Can you explain what this means ? thanks
See this two case example:

https://www.ssa.gov/oact/progdata/retirebenefit1.html

Did you see where it said, "A factor will always equal one for the year in which the person attains age 60 and all later years." It is readily apparent in both cases where they turned 60.
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Old 03-08-2021, 02:50 PM   #14
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Others have already answered....but I'll add some color here.

When I was 16-18, I was a dishwasher at a restaurant making minimum wage ($2.35/hr at the time). I call those my "dishwasher years".

Since SS is based on the highest 35 years of earnings...

Once I reach 35 years of earnings record, any work I do that is more than the inflation adjusted amount of my dishwasher years (I think I made about $1,100/year back in those days working PT) should raise my benefit. I actually did some analysis on this, as I'm only w*rking PT now and my income is very low...but it shows that I'll still be increasing my benefit.
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Old 03-08-2021, 04:34 PM   #15
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Originally Posted by latexman View Post
See this two case example:

https://www.ssa.gov/oact/progdata/retirebenefit1.html

Did you see where it said, "A factor will always equal one for the year in which the person attains age 60 and all later years." It is readily apparent in both cases where they turned 60.
Thanks Latexman. I understand now and see that ! I was confused if they even counted your income over 60 as part of your 35 years or not Got it now
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