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Old 01-21-2021, 01:25 PM   #1
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SS question

Hello all,

I have followed many threads here about when to take SS (I even posted a few).

Yesterday, a friend who is very wealthy from selling a company told me that one's SS can go down, as it is always looking back at your last few years' earnings. That I should regularly check my estimate on SSA.gov and if it ever goes down, to start taking it immediately! He said this advice was from his accountant.

In all my years of reading about SS I have not heard that before. I would have expected to read it here, as the longer one is ER'ed, the more likely it would seem to kick in.

Is this true? If, as many here suggest, I were to wait until 70, it would be about 9 years of no W2 income for me...
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Old 01-21-2021, 01:32 PM   #2
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Never heard this with SS. I've been out of work (and then officially retired) for several years now, and during that time, my SS estimates keep inching upward, due to COL, I suspect.

I have heard this with pension plans, in some circumstances. Some at my work wanted to work part-time for a few years before retiring (before the 8+ year period of layoffs started). They were told this would reduce their pension amounts if they went part-time for more than a certain amount of time (3-6 months?) and then retired from the company.
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Old 01-21-2021, 01:39 PM   #3
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What he told you is complete nonsense.

Your SS benefit is based on your 35 highest years of earnings. Period.
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Old 01-21-2021, 01:41 PM   #4
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That's what I thought (i.e. that it was nonsense).. but the more confidently someone asserts something, the less likely I am to believe it.
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Old 01-21-2021, 01:48 PM   #5
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Quote:
Originally Posted by BoodaGazelle View Post
That's what I thought (i.e. that it was nonsense).. but the more confidently someone asserts something, the less likely I am to believe it.
Fair enough. So he told you something confidently, and I told you the opposite, also confidently. You should believe neither of us, and go to the SS website where they will explain it all in excruciating detail.
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Old 01-21-2021, 01:53 PM   #6
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One's actual SS cannot go down. (*)

However, one's *estimate* of SS could go down in certain circumstances. The estimated amount of SS on their website is based on the assumption that you'll continue to make the same amount of income as last reported by the IRS to SS until you retire. So if you made $150K last year, and you're 50, then SS assumes you'll make $150K for the next 15 years or so.

When you stop working and then have a lower income year and then report it to the IRS and they then report it to SS, it will cause SS to recalculate your estimated benefit on those lower earnings projections. If you FIRE at age 50 and your earned income goes to zero, then SS now assumes you'll make $0 for the next 15 years or so.

Depending on your earnings history, what you made your last year, and what your income drops to once you stop working, I could imagine scenarios where the estimated SS amount might drop. These scenarios would typically be workers with short earnings histories and/or higher salaries.

However, again, that is estimated SS based on estimates of your future income. Your actual SS is calculated on your actual earnings history. So although the premise may be accurate (sometimes SS estimates can drop), the conclusion (start taking SS immediately) is faulty and unwarranted.

I would add that most people who make it past the second bend point (most people on this forum) would probably never see the effect I've described.

(Since the SS estimate is in current dollars and one's actual SS takes into account certain inflation factors, I could also imagine scenarios where there are slight drops if one is very far away from SS age and actual inflation or wage growth vary significantly from SS assumptions. But I'm not even sure if that could actually happen, and if so we'd probably have bigger problems to worry about. It also doesn't really fit with your friend's description.)

(*) Generally speaking and assuming no changes to law and ignoring the funding shortfall in the future.
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Old 01-21-2021, 02:06 PM   #7
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It's fine if it doesn't go *up* because I don't have income for the last few years. Based o their current estimates, I will be fine.
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Old 01-21-2021, 02:41 PM   #8
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It is only tied to earnings over the past 35 years. However, it is COLA-adjusted annually; this adjustment is made whether or not you're withdrawing. The only time it could 'go down' is if you don't continue working until full retirement age. But you can still calculate your future PIA online.
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Old 01-21-2021, 03:33 PM   #9
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It can go down if the average US wage were to do down. After age 60, the PIA is no longer adjusted for average wages, rather just for general inflation. In 2020, wages probably did go down, so folks that turned 60 in 2020 will get less than they think. But it's nothing to do with your specific wages.

Probably the person is getting confused as the SS website assumes you continue to work until your FRA. If the future years were going to be in your top 35, then they might not be if you take a lower paying job.
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Old 01-22-2021, 06:45 AM   #10
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First off, your friend needs a new accountant. SS does not go down. Im thinking what he might have meant was if he had a year with a large amount of earnings from possibly a capital gains sale (which happened to me) was that my Medicare payment went way up, which made my SS payment go down. After a year it adjusted back. But to state if you see that go down that you should hurry up and claim it is totally ridiculous, and likely dangerous to take it too early. That could cost you a lot.
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