SS benefits and calculating them

Lazy Jack

Confused about dryer sheets
Dec 21, 2005
I got my annual statement from the SS administration describing how much money I've contributed, and their forecast of my retirement benefits. There are words snuck in there  that say your estimated benefits assume you will continue to contribute up to retirement age at the same rate you have been contributing.

I've always maxed out my contributions to SS (not by choice) every year for the last 30. Now, if I retire at age 55, and don't contribute for the last 10 years to age 65, then I assume this means my forecasted benefit will start to decline.

Is there any way to find out or calculate what my future benefit will be if I stop contributing at the rate I have been contributing...or stop altogether for a number of years?

Knowing my SS benefit has a big impact on how much I need to retire early, as when SS kicks in it likely will be a substantial percentage of my minimum living expenses (like 75%), and therefore affects how much I need to save, and how much I can withdraw in the pre-SS years.
Based on my calculations the penalty, If you can call it that, is about 1 percent per year of early retirement.

So if you retire early at 55 years old then you'll get around 12 percent less than you would if you worked to full retirement age.

The calculator listed is clearly more accurate however my ball park numbers are more informative for a casual calculation.

Keep in mind that SS laws and rules will likely change. So keep your fingers crossed
It does need Brushing. I brush it at least once a year whether I need to or not.

But the great thing is that I can whistle really good.
Done...that sure was easy...and yes, about 1% for each year of early retirement works in my case too.
I ran some projected numbers through the calculator--it was depressing. I'm self-employed part-time, so I pay both sides of the SS payroll tax. It came out to a lot of money last year. According to the calculator, for every additional year I contribute those many thousands of dollars I'll increase my monthly SS check by less than 30 bucks. In later years the increase is less than 10 bucks per month in benefits for each additional year of contributions.

Yes, privatization (or partial privatization) would be better for me. Heck, lottery tickets would be better. Of course, the good of the collective is what we are pursuing. I don't think we'll be hearing any more about privatization or individual ownership again from Washington for a long time.
I thought that your SS calc was based on your best 35 years and if you didn't have 35 years, the years less would be calculated with 0 dollars. Is this not correct:confused:
Beststash said:
I thought that your SS calc was based on your best 35 years and if you didn't have 35 years,  the years less would be calculated with 0 dollars. Is this not correct:confused:
Yup. I have 25 years of earnings and the rest are zeroes.

I have a spreadsheet (of course I do) tracking the money we've put into our SS. Since 1977 I've contributed $45,585 and a conservative 7% tax-deferred return would grow that to $110K today. If it kept compounding at 7% until I'm 62, in 2022, it'd have $328K. At that point I'll presumably be permitted by SS to withdraw up to $9K per year, which would work out to a 2.7% withdrawal rate for this hypothetical privatized SS account.

Of course SS is a risk-free investment, so to withdraw $9K at 4% per year it'd only have to grow to $225K, which implies a 5.7% annual return over 45 years (from 1977-2022). I'd take that risk. I'll be happy if we take out more than we put in.

But I'd rather take 4% of $328K.

Your common assumption about SS being related to an investment is misguided.

When I make the same calculations and project my draw based on what I paid in (and will pay in) using historical market returns I just want to shoot somebody. My draw out of SS will be a pitance compared to the Nords-method SS as investment calculation.

I feel better about the whole thing thinking about SS as welfare rather than as an actual investment.
And don't forget that you may lose 1% per year by retiring early, but you're also not paying in during those years.
TromboneAl said:
And don't forget that you may lose 1% per year by retiring early, but you're also not paying in during those years.
I'd rather ER than fully fund SS! It'll add another 25% to my pension, nothing to sneeze at, but not worth trying to raise the percentage.
T2 benefits are skewed to give a greater "return" to those on the lower end of the scale. It is by no means a "put in a dollar, get back 1.x dollars" straight line comp.

SS does a lot more than just give you back what you paid in. It also pays your stay-at-home or low-earning spouse an additional 50% of your benefit when you retire (or when s/he turns 62) and 100% after you die, it provides disability payments if you can't work, and it pays all widows & orphans (to age 18) of workers who die. I can't find the data just now (not the best googler), but I think the things I listed account for close to 50% of SS payouts.
Yep, it is best to consider SS as intergenerational welfare. It's only a matter of time before it is means-tested, IMO. Still, I can't help but think how much better off many would be with at least some type of partial privatization, while stil preserving the "safety net" aspects of the present system.

While I don't agree with his position entirely, I think Wm Bernstein did an excellent good job of puting the whole SS wealth transfer issue into perspective back. He wrote this in 2000, but everything still applies today.

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