# Social Security estimate

#### W2R

##### Moderator Emeritus
I got my yearly social security statement, which is always fun since the estimate just keeps going up.

The estimate assumes that you will continue making the same amount of money as you did on the most recent year they include (2006, this year), and keep working until the day you are 62, if you claim benefits at 62.

Now for me, that's not too far off since I will quit 7 months short of my 62nd birthday.

Also, the "young dreamers" probably don't want to bother with an estimate, since many of them feel there will be massive changes before they get to 62.

But for others, who may be a couple of years short of retiring in their 50's, remember that the number on your statement depends on the above assumptions.

You can always use one of the calculators at Social Security Online . But how much fun is a stupid online calculator? Not a whole lot. If you are like me, and like to play with things in Excel, you can find out how it is computed, set it up for yourself in Excel, and try different scenarios just for fun. Here is the explanation of how they really compute these estimates for someone born in 1946: Your Retirement Benefit: How It Is Figured (2007)

You can keep playing with it until it seems to be correct, considering the numbers you are seeing on your statement. Maybe try "fudging" the indices a little if you are a long way from 62 - - but I just use the ones they list, since I was born in 1948. Close enough for me.

Then, you can try entering "0" income for years between your planned ER and age 62, to get some idea of how much you might actually get compared with a similar estimate assuming you worked until 62.

I have been doing this for a number of years, without fudging the indices, and my numbers bump up slightly each year as I enter the new indices, as does social security's estimate upon which mine is converging.

When it comes to planning, ask social security. But when it come to getting a feel for how this works, you might have some fun playing around with it in Excel.

I've looked at the online tool a couple of times, but I don't even bother using social security as part of my retirement plans. I'm 46, and I question whether or not it will even be around by then, or if the minimum age will be 87 by the time my "normal" retirement age rolls around. True, it may be around, but with all the questions around SS in the future, I prefer to rely on my on FI. If SS comes at 67, great! That'll be ore play money for DW and me!

We do have to check back with T-Al though, to see if us millionaires will be eligible.

R

But for others, who may be a couple of years short of retiring in their 50's, remember that the number on your statement depends on the above assumptions.

Just to give you an "exception" to the rule, I retired (e.g. stopped working for compensation) at age 59. I will/did not make any further contributions, but my "35 basis years" include most that I "maxed out". I don't think it may make a big difference in my final "actual monthly payment".

Also, being married, our plan is for my DW to take SS at 62. At age 66, her normal retirement (full) age, I will caim against her SS, and get 50% of would have been her age 66 payment. I'll delay filing/taking my SS till age 70, due to the assumption that I will indeed pass first, which will let my wife get 3x what her age 62 benefit is forecast to be.

As all things, forecasts are nice, but we'll see what reality actually is.

- Ron

I've looked at the online tool a couple of times, but I don't even bother using social security as part of my retirement plans. I'm 46, and I question whether or not it will even be around by then, or if the minimum age will be 87 by the time my "normal" retirement age rolls around. True, it may be around, but with all the questions around SS in the future, I prefer to rely on my on FI. If SS comes at 67, great! That'll be ore play money for DW and me!

We do have to check back with T-Al though, to see if us millionaires will be eligible.

R
Yes, though you may not feel young, to me you would fall into the category of "young dreamers" that I mentioned. Young dreamers might not be as interested as those in their early 50's, it seems to me. At least, if I was younger than 50, I think I'd just forgettaboutit.

I must admit that I am interested in figuring out how much it might be. I hope that not very many of us (or any of us?) would consider ER that was utterly dependent on SS.

Just to give you an "exception" to the rule, I retired (e.g. stopped working for compensation) at age 59. I will/did not make any further contributions, but my "35 basis years" include most that I "maxed out". I don't think it may make a big difference in my final "actual monthly payment".

Also, being married, our plan is for my DW to take SS at 62. At age 66, her normal retirement (full) age, I will caim against her SS, and get 50% of would have been her age 66 payment. I'll delay filing/taking my SS till age 70, due to the assumption that I will indeed pass first, which will let my wife get 3x what her age 62 benefit is forecast to be.

As all things, forecasts are nice, but we'll see what reality actually is.

- Ron
Whoa.... if you would have maxed out, those higher years that they assume you worked (when you didn't) will be replaced by the lowest earning of your 35 years. So, you might make less than your estimate.

I don't have much of a clue about the married couple configurations, since I haven't really looked into them. I'll take your word on that!

I agree - - the reality will be interesting. (As in the old Chinese curse, "May you live in interesting times!")

Whoa.... if you would have maxed out, those higher years that they assume you worked (when you didn't) will be replaced by the lowest earning of your 35 years. So, you might make less than your estimate.

I don't have much of a clue about the married couple configurations, since I haven't really looked into them. I'll take your word on that!

Maybe U should plan on getting married .....

Anyway, I have over 40 years of "credited service" so the few "low ones" (which were in my late 50's) will fall out of the calculation.

Remember that the prior years are adjusted (for inflation) and I do get a minor credit for being in the military "many moons ago".

Luckly, SS is just a bit of "extra" for us. Nice if we get it (as expected). However, it won't be the end of the world if we don't....

- Ron

Maybe U should plan on getting married .....

Anyway, I have over 40 years of "credited service" so the few "low ones" (which were in my late 50's) will fall out of the calculation.

Remember that the prior years are adjusted (for inflation) and I do get a minor credit for being in the military "many moons ago".

Luckly, SS is just a bit of "extra" for us. Nice if we get it (as expected). However, it won't be the end of the world if we don't....

- Ron
That's interesting that your low years were late in your career. If they weren't increased by as much of an inflation adjustment (via the indices) as they would have been, had they been early, maybe that would make more of a difference. Oh well! Either way, easy come, easy go. Glad you don't care one way or another...

As for marrying, it's not currently in our plans! We have both BTDT. I would have a lot of reading to do (about SS and pension), if my single status ever changed. I doubt it will, though. We get along really well as is, and it's hard to want to change a relationship that works as well as this one does.

I got my yearly social security statement, which is always fun since the estimate just keeps going up.
.

While the SS estimate keeps going up. The real question is - Which is going up faster - SS estimated payment or your cost of living?

I've looked at the online tool a couple of times, but I don't even bother using social security as part of my retirement plans. I'm 46, and I question whether or not it will even be around by then, or if the minimum age will be 87 by the time my "normal" retirement age rolls around. True, it may be around, but with all the questions around SS in the future, I prefer to rely on my on FI. If SS comes at 67, great! That'll be ore play money for DW and me!

We do have to check back with T-Al though, to see if us millionaires will be eligible.
R

I use to say the same bad things about SS 40+ years ago as people under 50 say about it now. It is better to be conservative and plan for having reduced benefits and be pleasantly surprised if it does not happen.

While the SS estimate keeps going up. The real question is - Which is going up faster - SS estimated payment or your cost of living?

True! It is supposed to be in today's dollars so it should go up. I still like seeing it happen, though.

On a separate note - - not responding to packrat specifically - -

Gosh, I hope this thread wasn't inappropriate since I didn't mean to clutter the board. I had seen people ask about how the SS estimate was computed (was it here? or over at diehards), and others just referring them to online calculators. After re-doing my estimate with the new indices, I thought maybe someone else would be nerdy enough to be interested.

The estimate assumes that you will continue making the same amount of money as you did on the most recent year they include (2006, this year), and keep working until the day you are 62, if you claim benefits at 62.

figured that out earlier on. if i remember it came out to about 20% less social security down the line. didn't seem worth the exta 15 years of effort.

True! It is supposed to be in today's dollars so it should go up. I still like seeing it happen, though.

On a separate note - - not responding to packrat specifically - -

Gosh, I hope this thread wasn't inappropriate since I didn't mean to clutter the board. I had seen people ask about how the SS estimate was computed (was it here? or over at diehards), and others just referring them to online calculators. After re-doing my estimate with the new indices, I thought maybe someone else would be nerdy enough to be interested.

Glad you're going to be receiving those SS checks, Want2Retire!
As for me, I won't be taking much out of the SS coffer. All the more for you!

Gosh, I hope this thread wasn't inappropriate since I didn't mean to clutter the board. I had seen people ask about how the SS estimate was computed (was it here? or over at diehards), and others just referring them to online calculators. After re-doing my estimate with the new indices, I thought maybe someone else would be nerdy enough to be interested.

Keep it up. I like clutter. One look in my shop or garages will confirm that.

But for others, who may be a couple of years short of retiring in their 50's, remember that the number on your statement depends on the above assumptions.

While this is true, it is also true that many people don't get much from social security in the way of extra return by working those extra years. For many workers, the first dollar contributed to social security is worth 6 times the last dollar contributed to social security.

For example, I'll reach the "15%" level in social security when I'm about 50. This means that each dollar contributed at 50 will be worth only 45% of each dollar contributed at 49 (and only 17% of each dollar contributed when I was 17 working at McDonald's). The reduction date is different for each individual as it depends on one's wage adjusted accumulated earnings up until that time.

So for me, the monthly payment estimate that I receive from SSA each year is not that different from what it would be if I retired today, even though I'm more than 18-19 years from my full retirement age. With respect to social security, it simply doesn't pay to work those extra years. The taxes are too great and the return is too small.

While this is true, it is also true that many people don't get much from social security in the way of extra return by working those extra years. For many workers, the first dollar contributed to social security is worth 6 times the last dollar contributed to social security.

For example, I'll reach the "15%" level in social security when I'm about 50. This means that each dollar contributed at 50 will be worth only 45% of each dollar contributed at 49 (and only 17% of each dollar contributed when I was 17 working at McDonald's). The reduction date is different for each individual as it depends on one's wage adjusted accumulated earnings up until that time.

So for me, the monthly payment estimate that I receive from SSA each year is not that different from what it would be if I retired today, even though I'm more than 18-19 years from my full retirement age. With respect to social security, it simply doesn't pay to work those extra years. The taxes are too great and the return is too small.

(Edited to be more positive): I see your point. It really doesn't pay to work longer if you have made that much by the time you are 50. To be honest, I would probably think twice about working any longer if I were in your position, as well.

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Keep it up. I like clutter. One look in my shop or garages will confirm that.
Hey, maybe you could print out this thread, frame it, and toss it in your garage. That would be a use for it

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Glad you're going to be receiving those SS checks, Want2Retire!
As for me, I won't be taking much out of the SS coffer. All the more for you!
Mine won't be big either! But hey, every dollar is welcome.

figured that out earlier on. if i remember it came out to about 20% less social security down the line. didn't seem worth the exta 15 years of effort.
I agree! Still, I never was fond of nasty surprises down the road.

Buying power of \$500 in twenty years?

I am going to get about \$500 a month in twenty years. I am trying to think of what that will buy in twenty years maybe it might cover the utilities?

While the SS estimate keeps going up. The real question is - Which is going up faster - SS estimated payment or your cost of living?

I use to say the same bad things about SS 40+ years ago as people under 50 say about it now. It is better to be conservative and plan for having reduced benefits and be pleasantly surprised if it does not happen.

I will second that statement! I was very surprised at the amount of SS DW and I receive (70/67 now). I never planned on SS and did not gear "retirement" in the 80's and 90's to receiving anything, although I knew "something" was going to be there. DW only had the minimum of quarters (she worked outside of the home for about 11 years) and I never earned a lot but did have about 42 years of work history for the SSA to work with. SS now makes up about 25% of our annual income, and most of it is "saved for later".

(Edited to be more positive): I see your point. It really doesn't pay to work longer if you have made that much by the time you are 50. To be honest, I would probably think twice about working any longer if I were in your position, as well.

I believe a lot of people are in this situation (probably without knowing it). I don't think it is all that rare to be at the "15%" social security level, where a person gets very little added benefit for each additional dollar contributed to social security. Not counting high school and college jobs (grad school RA/TA stipends being exempt from SS deductions), I've been in the workforce for only 16 1/2 years (with about 10 above the SS limit). However, in a couple of years I will be in this situation.

Have you gone through the numbers using the web site you referenced to compute where you are at? Basically, all you need to do is input your (wage adjusted) salary over your working career, and crunch a few numbers.

BTW, I laughed when you said you edited your post to be more positive. I don't how anyone can be more positive than you.

I believe a lot of people are in this situation (probably without knowing it). I don't think it is all that rare to be at the "15%" social security level, where a person gets very little added benefit for each additional dollar contributed to social security. Not counting high school and college jobs (grad school RA/TA stipends being exempt from SS deductions), I've been in the workforce for only 16 1/2 years (with about 10 above the SS limit). However, in a couple of years I will be in this situation.

Have you gone through the numbers using the web site you referenced to compute where you are at? Basically, all you need to do is input your (wage adjusted) salary over your working career, and crunch a few numbers.

BTW, I laughed when you said you edited your post to be more positive. I don't how anyone can be more positive than you.
Aw, thank you! That makes me feel better. I do try to be positive and to contribute what I can to the forum. I was feeling a little down at the time.

Yes, the reason I brought this link to the website is that I have crunched the numbers now and then for nearly a decade, using my own numbers and sometimes other possible scenarios. I enjoy feeling familiar with exactly how SS computes benefits.

In order to get into the 15% bracket, you have to have earned over 4288*420=\$1,800,960 in adjusted wages. In the 18 years in the workforce that it will take for you to get there, that would mean you would have averaged \$100,053 in adjusted wages. Pretty good for your first year on the job, so I would suspect you started lower and are doing considerably better by now. Congratulations on finding such a high paying career!

Looking at the table in the original link, it appears that one would have to make over the maximum social security yearly wage for each of 19 years in order to move into the 15% category for most of the qualified wages earned during the 19th year.

So, suppose you would be making \$200K in adjusted yearly salary from age 50-55, and are in the 15% category. How much extra would that money add to your SS? At first I thought that it might be

((\$200,000 x 5yrs)/420)*.15 = \$357/mo increase in monthly SS

But then in your relatively stratospheric salary range, there are upper limits to how much of your salary are social security wages (\$97,500 for 2007, though that is far more than I make so I have been ignoring it). That would cut the increase in half,

((\$97,500 x 5 yrs)/420)*.15 = \$174/mo increase in monthly SS

Also there might even be upper limits on what your monthly payments can be as well, I suppose! Such limits will never apply to me, so I really have never looked into them.

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In order to get into the 15% bracket, you have to have earned over 4288*420=\$1,800,960 in adjusted wages. In the 18 years in the workforce that it will take for you to get there, that would mean you would have averaged \$100,053 in adjusted wages. Pretty good for your first year on the job, so I would suspect you started lower and are doing considerably better by now. Congratulations on finding such a high paying career!

So, suppose you would be making \$200K in adjusted yearly salary from age 50-55, and are in the 15% category. How much extra would that money add to your SS? At first I thought that it might be

((\$200,000 x 5yrs)/420)*.15 = \$357/mo increase in monthly SS

But then in your relatively stratospheric salary range, there are upper limits to how much of your salary are social security wages (\$97,500 for 2007, though that is far more than I make so I have been ignoring it). That would cut the increase in half,

((\$97,500 x 5 yrs)/420)*.15 = \$174/mo increase in monthly SS

Your analysis is quite correct. Very few people are aware of how SS benefits are obtained. Thank you for posting the web site. It is one of my favorites, as they update the wage adjustment factors each year (as you know).

In summary, people who are at or above the social security maximum (roughly 100K/yr in today's wages) need to work about 18 years before they reach the "level of little return." The extra \$174/mo requires an additional 5 years of labor. Not worth it in my opinion.

While 100K/yr is good, it is not an astronomical salary. About 75% of the scientific/engineering professionals at my organization are at that level. As for careers, ours are not too dissimilar. I'm a solid earth geophysicist. However, I'm not a fed, even though I work at a government laboratory.

I am already in the '\$174' range... but, I still need the salary for a few more years to get where I want to be.... but I will not work the final 10 years to get the extra \$348 per month.... not worth it...

NOW, when my sister was about to retire (teacher)... she did EVERYTHING that paid money because they used the top 3 years... I said, 'think that you get this for the rest of your life'.... it made it a lot easier to do thing you would not 'normally' do...

Can't comment on the exact payout based on monies paid in.

However, when I look at the likely budget deficits (more due to Medicare costs doubling between 2010-20 rather than Social Security itself) I think its unlikely that social security payouts will remain stable. Who knows when it occurs, but it seems highly likely that 2 things happen over time:

1) Payout of social security gets postponed over time with standard retirement age getting moved later over time

2) Payout gets moved downward based on income

As a result, anyone who prepares for retirement should stress test their withdrawal rates based on lower social security payouts just to be safe.