Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
SSA estimate letter assumptions on when I retire?
Old 02-22-2021, 11:28 PM   #1
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
SSA estimate letter assumptions on when I retire?

I'm 52 and have been working for 25 years and some of the early few years had really low earnings.
The estimate letter from the SSA shows an estimated amount for taking SS at 62, 67 (FRA) and 70.

I'm trying to understand the assumptions the SSA makes in those calculations. It sounds like they extrapolate my future salary from the last 2 years of data. I assume it takes inflation into account too.

When does it consider you stop working at though? FRA?


Or looking at it another way, if I retire at 62 (current goal) and take SS right away, my actual payment should be close to the estimate in the statement.
If I wait till 67 to draw on SS, will I get roughly the amount in the current estimate, or does that amount assume I work till 67 also? If that's the case, I will be getting less than estimates because I will be missing 5 top earning years compared to the estimate.

Hope I explained this right.
BlueberryPie is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-23-2021, 12:26 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 11,054
You can set up an online account at the SS site. It's a good idea to do it, so nobody sets up your account instead of you, example scammer.

The SS site has a calculator that allows you to put in when you want to retire to get a slightly more accurate estimate.

They do assume in the letter you are going to make the same amount roughly speaking for the next X years.

If you work more than 30 yrs, the extra years replace the tiny earning years, you don't lose them, so it boosts your earnings score.

However, there are bend points, so once your earnings get up there, the next $1 earned contributes a lot less to your SS check than the first $1. There are 3 bend points. It's all very complex.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 02-23-2021, 12:45 AM   #3
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
I get the general idea of the bend points, etc ...

After further reading tonight it does seem the estimates assume you will keep working till your start claiming.

So if I retire at 62 but wait till 67 to claim, my actual number will likely be less than the estimate because they assume I earned a much higher salary for 5 out of the 35 years.

Because of the bend points the difference may not be that significant. I need to find a calculator or spreadsheet that lets you enter individual earnings by year.
BlueberryPie is offline   Reply With Quote
Old 02-23-2021, 12:52 AM   #4
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
I should find what I need here: https://www.ssa.gov/OACT/anypia/index.html

and understand how working more or less years from now will impact the benefits, regardless of what age I take them at.
BlueberryPie is offline   Reply With Quote
Old 02-23-2021, 05:29 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 7,667
Quote:
Originally Posted by BlueberryPie View Post
I should find what I need here: https://www.ssa.gov/OACT/anypia/index.html

and understand how working more or less years from now will impact the benefits, regardless of what age I take them at.
See below for another official SS calculator. No pasting involved and you can play with the earnings stopping at any age and the effect.

https://www.ssa.gov/benefits/retirement/estimator.html
__________________
TGIM
Dtail is offline   Reply With Quote
Old 02-23-2021, 09:09 AM   #6
Full time employment: Posting here.
Out-to-Lunch's Avatar
 
Join Date: Jan 2020
Location: Milwaukee
Posts: 970
Here is an online calculator. It does require pasting, but it is useful: https://ssa.tools.

Also, a nice Excel-based calculator is available here: https://www.bogleheads.org/forum/viewtopic.php?t=262772
__________________
The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
Out-to-Lunch is offline   Reply With Quote
Old 02-23-2021, 09:11 AM   #7
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
Thanks Detail, I can't figure out how to make that calculator determine "work till 62 but start benefits at 70". It assumes I want to start benefits as early as possible after stopping work.

I'll keep looking at other calculators to see how much difference swapping 5 years of low earnings with late career earnings makes. I suspect (hope) it won't make a substantial difference.
BlueberryPie is offline   Reply With Quote
Old 02-23-2021, 09:45 AM   #8
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 16,104
Quote:
Originally Posted by BlueberryPie View Post
Thanks Detail, I can't figure out how to make that calculator determine "work till 62 but start benefits at 70". It assumes I want to start benefits as early as possible after stopping work.

I'll keep looking at other calculators to see how much difference swapping 5 years of low earnings with late career earnings makes. I suspect (hope) it won't make a substantial difference.
SSA assumes you work to 62 at your last reported wage. Wages prior to the year you turn 60 are indexed. Wages for the last two years are not.

So here is how to see the effect of changing that assumption:


Go to "myssa" and get your earnings record. Copy and paste it into an Excel spreadsheet.

Then go here https://www.ssa.gov/OACT/COLA/awifactors.html and get the average wage indexing factors. The year you input should be the year you turn 62. Copy and paste the appropriate year range to your spreadsheet. Make sure they line up properly with the years in your earnings report.

Use a PRODUCT function to multiply your earnings in a particular year by the AWI factor. Keep that as one column and make a second, duplicate column next to it.

From the duplicate column, eliminate all but the highest 35 years, then SUM the column. Divide by 35, which gives you your average yearly indexed wage. Then divide by 12 for your average month wage.

Calculate as follows: 1st $992/mo x 90% + above $992 up to $6002 x 40%; and anything over $6002 x 15%. This gives you your monthly primary insurance amount. That is what you would get at full retirement age.

Now you can play around with your earnings to substitute zeros for the last few years, which means you'll need to add back an equal number of your early, low earning years (as indexed) to keep the number of years at 35. Do the calculation again with the new highest 35 years and see how your PIA changes.



To find out what you'll get at 70, multiply your PIA by (1 + (.0067 x the no. of months between your full retirement age and age 70))
__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 02-23-2021, 09:48 AM   #9
Dryer sheet aficionado
foxcreek9's Avatar
 
Join Date: Sep 2015
Posts: 43
I retired at 56, my FRA SS estimate dropped 2.7% from the year of retirement to my first full year of retirement (ie no income). 24 of my top 35 were max ss tax years, fwiw.
foxcreek9 is offline   Reply With Quote
Old 02-23-2021, 10:17 AM   #10
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
thanks, I found this online calculator https://www.doctoredmoney.org/ss-benefit-calculator which lets you enter your actual numbers and show benefits at different ages. it uses 2018 rates/numbers by I am not as interested in exact numbers as in understanding the impact of working longer on my SS benefits.

It confirms what I was hoping: benefits if I stop working at 62 (current plan) would be $3796 if I wait till 70. Benefits if I stop working at 70 and then take the benefits immediately would be $3859 or an extra $63 per month or about $1.6% or less than $800 a year.
I am lucky enough that my investments to complement SS will be such that this $800/year is in the noise.

Regardless of what year I stop working, when I start taking benefits will of course have a much greater impact on the monthly check. I'm currently of the school that SS is your long term insurance against running our of money in your portfolio. If you can afford not to take it until 70, but run out of portfolio money sometime after 70, the SS+Spousal benefit would be $5700/month which is far from destitute!
Not that I plan on letting my portfolio run out...

I don't have anywhere to host a picture or I would have attached the graph I generated from this exercise.
BlueberryPie is offline   Reply With Quote
Old 02-23-2021, 10:55 AM   #11
Dryer sheet wannabe
 
Join Date: Feb 2021
Posts: 23
I haven't played with it yet but it seems that the SA offers a similar tool: https://www.ssa.gov/oact/anypia/download.html
BlueberryPie is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Big day sent filled out SSA questionnaire 2019 earnings estimate $5,000 rayinpenn Other topics 2 09-03-2018 02:06 PM
Invalid Assumptions? Whisper9999 FIRE and Money 22 11-30-2004 06:58 AM
Assumptions malakito Young Dreamers 31 10-05-2004 03:21 PM
Inflation assumptions Peter FIRE and Money 5 12-19-2003 01:48 PM

» Quick Links

 
All times are GMT -6. The time now is 03:17 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.