Calculating Social Security Retirement Benefits

Gumby said:
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.
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Not really. I was just curious about the calculation. There are some much false information out there about how to calculate your SS benefits.
 
@Gumby I have a question regarding special PIA used for low wage earners, in your post you had listed for 30 years work history. Is that a minimum SS amount for someone who did not earn much but has 40 quarters (10 years equivalent) of contribution?
 
Gumby said:
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 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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I assumed you entered the age you turn 62 based on instructions in the URL below as well as the videos I included in my first post. That is what was confusing me on what year's indexing factors table to use.

https://www.ssa.gov/OACT/COLA/awifactors.html
 
G-Man said:
Not really. I was just curious about the calculation. There are some much false information out there about how to calculate your SS benefits.
Click to expand...
I like the free website ssa.tools to calculate my PIA even though it s not the official SS website. It visually shows how SS benefit is calculated and also explains in understandable words (not the legalize used by the government) the calculation steps taken.
 
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Not everyone stops working at 60, and what you want to happen is for the calculator to accommodate that fact, because those extra years worked in one's sixties may turn out to be among the highest 35 years of earnings. If you put in the year she turns 62, what that calculator shows is that, in calculating the AIME, wages are indexed by the national average wage index until she turns 60. After she turns 60, if she is still working, any wages earned are not indexed. That is why the last two years' indexing factors are 1.0000 They represent wages earned the year she turns 60 (you never inflation adjust the current year) and the year she turns 61, which are not indexed.

You have said that your wife won't turn 60 until 2023. If we wanted to be completely accurate, you would put 2025 into the calculator, since that is the year she turns 62. But the calculator cannot currently run that calculation (try inputting 2025 - it doesn't work), because it does not know what the national wage index will do for the years of 2022 and 2023. My suggestion of putting 2023 in the box is just a way to get some rough idea of the indexing factors. They will be higher than the calculator shows, because she still has two more years of indexing left (if you put 2023 in the box, it only shows indexing through 2021). I apologize for not being clearer about that.

To repeat what I said earlier, at this point you can only estimate. You won't know her benefit for certain until she applies and the SSA calculates it. If you underestimate, that can only be to your benefit when the money actually starts coming in.
 
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Gumby said:
Not everyone stops working at 60, and what you want to happen is for the calculator to accommodate that fact, because those extra years worked in one's sixties may turn out to be among the highest 35 years of earnings. If you put in the year she turns 62, what that calculator shows is that, in calculating the AIME, wages are indexed by the national average wage index until she turns 60. After she turns 60, if she is still working, any wages earned are not indexed. That is why the last two years' indexing factors are 1.0000 They represent wages earned the year she turns 60 (you never inflation adjust the current year) and the year she turns 61, which are not indexed.

You have said that your wife won't turn 60 until 2023. If we wanted to be completely accurate, you would put 2025 into the calculator, since that is the year she turns 62. But the calculator cannot currently run that calculation (try inputting 2025 - it doesn't work), because it does not know what the national wage index will do for the years of 2022 and 2023. My suggestion of putting 2023 in the box is just a way to get some rough idea of the indexing factors. They will be higher than the calculator shows, because she still has two more years of indexing left (if you put 2023 in the box, it only shows indexing through 2021). I apologize for not being clearer about that.

To repeat what I said earlier, at this point you can only estimate. You won't know her benefit for certain until she applies and the SSA calculates it. If you underestimate, that can only be to your benefit when the money actually starts coming in.
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Gumby.. So what year should I enter to get the correct indexing factor to calculate my PIA? Here is my situation. Plan to stop working in 2024 @ age 58. Year 2022 and 2023 will be used to determine my highest 35 years of earnings. However, year 2024 will not.

https://www.ssa.gov/OACT/COLA/awifactors.html
 
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G-Man said:
Gumby.. So what year should I enter to get the correct indexing factor to calculate my PIA? Here is my situation. Plan to stop working in 2024 @ age 58. Year 2022 and 2023 will be used to determine my highest 35 years of earnings. However, year 2024 will not.

https://www.ssa.gov/OACT/COLA/awifactors.html
Click to expand...


You would put in the year you turn 62 (2026), but it won't work, because the tool does not yet have sufficient average wage index data to make that calculation.
 
Gumby said:
You would put in the year you turn 62 (2026), but it won't work, because the tool does not yet have sufficient average wage index data to make that calculation.
Click to expand...

Below are the indexing factors that is being generated. Are those the indexing factors I should be using in my PIA calculation?

Indexing factors
Year Factor
1965 14.6760891
1966 13.8450396
1967 13.1145252
1968 12.2711298
1969 11.6007082
1970 11.0522369
1971 10.5234644
1972 9.5842034
1973 9.0198347
1974 8.5137384
1975 7.9217268
1976 7.4103873
1977 6.9913809
1978 6.4770363
1979 5.9560110
1980 5.4638597
1981 4.9641540
1982 4.7051263
1983 4.4865617
1984 4.2374647
1985 4.0643037
1986 3.9471482
1987 3.7105122
1988 3.5363426
1989 3.4016577
1990 3.2514673
1991 3.1346527
1992 2.9810568
1993 2.9556376
1994 2.8783844
1995 2.7674545
1996 2.6384215
1997 2.4929552
1998 2.3689667
1999 2.2439169
2000 2.1263310
2001 2.0767862
2002 2.0561652
2003 2.0071008
2004 1.9179403
2005 1.8502395
2006 1.7689339
2007 1.6921415
2008 1.6540907
2009 1.6794175
2010 1.6406409
2011 1.5907960
2012 1.5426267
2013 1.5231587
2014 1.4709457
2015 1.4214914
2016 1.4056079
2017 1.3586888
2018 1.3111658
2019 1.2638041
2020 1.2290762
2021 1.1639124
2022 1.0924952
2023 1.0427024
2024 1.0000000
2025 1.0000000
 
G-Man said:
Below are the indexing factors that is being generated. Are those the indexing factors I should be using in my PIA calculation?
...
Click to expand...

So long as you are aware of the caveat in the program. To wit:

You have asked for factors that have not yet been determined. We used 4 years of estimated wage growth to compute these factors. We used the intermediate assumptions for the average wage index in the 2022 Trustees Report for years after 2020. If you don't want estimates of future inflation in your factors, use the factors for 2022, the last eligibility year for which all factors are known.
Click to expand...

Maybe their estimate will be right. Maybe not.
 
G-Man said:
The key takeaway for me is that I should not be using the 2022 indexing factors to calculate future social security benefits. See the screenshot below. That is the point I'm trying to validate on this thread.
Click to expand...


So, you think Trustee Assumption No. 2 is the most likely assumption ?
 
Gumby said:
Then, they calculate your PIA, which is 90% of the first $1024 dollars of AIME plus 40% 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 x (6172 - 1024)) + (0.15 x (7000 - 6172)) = $3105.
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Looks like the 0.4 x (6172 - 1024) should be .. 0.32 x (6172 - 1024) for the 2nd bend. Should be 32% instead of 40%
 
cyber888 said:
Looks like the 0.4 x (6172 - 1024) should be .. 0.32 x (6172 - 1024) for the 2nd bend. Should be 32% instead of 40%
Click to expand...

You are right; it should be 32%. I have corrected the math on that post.

I believe I was thinking of WEP, which can reduce the amount below the first bend point to 40%. Irrelevant here (and still wrong ), but that's my best guess as to what I was thinking.
 
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Gumby said:
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.
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Gumby, do you have a source for the 16-year-old age limit? I ask because I had income as a younger child (that shows on my SS.gov records) that counts in my 35 highest years due to the indexing. My benefits will be lower if they limit my earnings calcs to when I was 16 and above.

Thanks!
 
As far as I am aware, there is no 16 year old age limit for SS earnings. So if your record shows earlier earnings, then they go into the calculation too. I just picked 16 in my example because that's when I got my first job from which social security was withheld. Where I lived at the time, that was the earliest you could start working. I suspect it is a common age for first jobs.
 
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Gumby said:
You are right; it should be 32%. I have corrected the math on that post.

I believe I was thinking of WEP, which can reduce the amount below the first bend point to 40%. Irrelevant here (and still wrong ), but that's my best guess as to what I was thinking.
Click to expand...

Thanks for the correction. Looks good now.
 
Based on the PIA software app, the yearly index factors, wage index, and bend numbers changes based on future assumptions, so it's a moving target.

G-Man said:
Below are the indexing factors that is being generated. Are those the indexing factors I should be using in my PIA calculation?

Indexing factors
Year Factor
1965 14.6760891
1966 13.8450396
1967 13.1145252
1968 12.2711298
1969 11.6007082
1970 11.0522369
1971 10.5234644
1972 9.5842034
1973 9.0198347
1974 8.5137384
1975 7.9217268
1976 7.4103873
1977 6.9913809
1978 6.4770363
1979 5.9560110
1980 5.4638597
1981 4.9641540
1982 4.7051263
1983 4.4865617
1984 4.2374647
1985 4.0643037
1986 3.9471482
1987 3.7105122
1988 3.5363426
1989 3.4016577
1990 3.2514673
1991 3.1346527
1992 2.9810568
1993 2.9556376
1994 2.8783844
1995 2.7674545
1996 2.6384215
1997 2.4929552
1998 2.3689667
1999 2.2439169
2000 2.1263310
2001 2.0767862
2002 2.0561652
2003 2.0071008
2004 1.9179403
2005 1.8502395
2006 1.7689339
2007 1.6921415
2008 1.6540907
2009 1.6794175
2010 1.6406409
2011 1.5907960
2012 1.5426267
2013 1.5231587
2014 1.4709457
2015 1.4214914
2016 1.4056079
2017 1.3586888
2018 1.3111658
2019 1.2638041
2020 1.2290762
2021 1.1639124
2022 1.0924952
2023 1.0427024
2024 1.0000000
2025 1.0000000
Click to expand...
 
cyber888 said:
Based on the PIA software app, the yearly index factors, wage index, and bend numbers changes based on future assumptions, so it's a moving target.
Click to expand...

Here is the key takeaway for me. If you are not turning 62 until sometime in the future, your PIA will be more than your PIA calculated today using the 2022 indexing factors.
 
G-Man said:
Here is the key takeaway for me. If you are not turning 62 until sometime in the future, your PIA will be more than your PIA calculated today using the 2022 indexing factors.
Click to expand...
I would say that is accurate.
 
G-Man said:
Here is the key takeaway for me. If you are not turning 62 until sometime in the future, your PIA will be more than your PIA calculated today using the 2022 indexing factors.
Click to expand...

Agree. It's going to be higher :)
 
Devin also has a Facebook group to answer questions called "Social Security Intelligence". The group should reach 30,000 members within the next 2 weeks. (I am an admin for the group and just put E-R in the "how did you hear about us" for quick acceptance into the group)
He also has a podcast along with attorney John Ross called "Big Picture Retirement" that I think is one of the most informative podcasts around.
 
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imnontrad said:
Devin also has a Facebook group to answer questions called "Social Security Intelligence". The group should reach 30,000 members within the next 2 weeks. (I am an admin for the group and just put E-R in the "how did you hear about us" for quick acceptance into the group)
He also has a podcast along with attorney John Ross called "Big Picture Retirement" that I think is one of the most informative podcasts around.
Click to expand...

Unfortunately, I'm not on social media.
 
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