social security amount

How can I know how much social security I will get if I take it at 62, 67 and 70 yol?

I have paid social security taxes for almost 3 decades. But I intend to retire at 54 yol.
what is the impact of not paying the s.s. tax moving forward on my benefits?

will I get more benefits the more additional years I work? is there a cap on how much one can get from social security? what is it?

tj

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How can I know how much social security I will get if I take it at 62, 67 and 70 yol?

The first step is to go to https://www.ssa.gov/ and create a “My Social Security” account. Next you want to generate and download your personalized Social Security statement that will provide an estimate of your benefit for each year from 62 to 70. There is a catch: the estimates assume that you will have earnings of $54,489 until the year you claim benefits.

I have paid social security taxes for almost 3 decades. But I intend to retire at 54 yol.
what is the impact of not paying the s.s. tax moving forward on my benefits?

If you don’t have 35 years of earnings, years without earnings are recorded with $0 earned income and your benefit will be less than indicated in your Social Security statement. Another catch: COLA is earned from age 62 and recursively applied to your Primary Insurance Amount (PIA) when you apply for benefit.

will I get more benefits the more additional years I work? is there a cap on how much one can get from social security? what is it?

Yes, you will receive more benefits the more years you have earned income. I had 54 years of earned income when I retired and claimed benefits. Only the 35 years with the most earned income were used to determine my PIA to which COLA was recursively applied when I applied for benefits.

Also note that only earnings up to each year’s FICA earnings cap are used to calculate benefits. At age 60, all FICA earnings before age 60 will be adjusted for wage inflation. There is no inflation adjustments for earnings after age 59.

The maximum monthly benefit changes each year. I’m not sure how it is calculated.

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The first step is to go to https://www.ssa.gov/ and create a “My Social Security” account. Next you want to generate and download your personalized Social Security statement that will provide an estimate of your benefit for each year from 62 to 70. There is a catch: the estimates assume that you will have earnings of $54,489 until the year you claim benefits.

Actually, you can tell the estimator on the “My Social Security Account” page what your future earnings will be. It defaults to whatever your last reported year was but is easily changeable if you click the little down arrow. The actual catch is that if you are retiring early, the estimator only allows you to put 62 in as your earliest age of retirement. So, if you put a non-zero amount in for your future earnings, it will assume that you will make that amount until the date you’ve chosen for your retirement - which is at least age 62.

That means that for someone who is retiring before they turn 62, but isn’t retired yet, there isn’t a great way to get an accurate estimate - they can put in $0 for future earnings to see a low estimate, and then set their retirement age at 62 and put in whatever their current earnings are as the future amount to get a higher estimate. The actual benefit will be between those two amounts.

That said, especially if you already have at least 35 years of earnings, the estimate may not change that much. I’m 60 and retired in 2018, but had 42 years of earnings recorded before I retired. Even with some really low earning years before I started my ‘real’ jobs after college, and a couple of low earning years when I was in grad school, if I put in the amount that I earned in my last full year before I retired rather than $0 (which is my default now, since I’ve been retired for a few years), my monthly benefit at age 62 changes by $49; at age 67 (my FRA) by $145/month and at age 70, by $203/month. While an extra $50 - $200/month isn’t something to sneeze at, it certainly wasn’t enough to entice me to continue working.

Note - there are other benefit estimate calculators that can be used on the SS website. You can get them here https://www.ssa.gov/oact/anypia/index.html

If you don’t have 35 years of earnings, years without earnings are recorded with $0 earned income and your benefit will be less than indicated in your Social Security statement.

Nope. As long as you have earned enough credits to qualify for SS (40 quarterly credits), you can put $0 in for future earnings, and the estimator on the My Social Security page will figure your benefit with those $0 years are included in the 35 highest earning years. Other estimators may or may not do so, depending on which one you use.

Another catch: COLA is earned from age 62 and recursively applied to your Primary Insurance Amount (PIA) when you apply for benefit.
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I had 54 years of earned income when I retired and claimed benefits. Only the 35 years with the most earned income were used to determine my PIA to which COLA was recursively applied when I applied for benefits.

Not exactly. You are missing the indexing of wages earned before you are 60 to determine your 35 highest earning years. SS benefits are calculated based on your Average Indexed Monthly Earnings (AIME). To get your AIME, first you need to find the highest 35 years of earnings. To do that, your earnings from years prior to the year you turned 60 are adjusted to be comparable to the wages in the year you turn 60 by multiplying the ratio of the Average Wage Index (AWI) in the year you turn 60 divided by the AWI in the year you earned them, so that they are directly comparable to the year that you turned 60. The years after you turned 60 are not indexed, and are just taken at face value. The 35 highest years of earnings are then summed up and divided by (35 x 12) to determine your AIME. Your AIME is then applied to a bend point formula to figure your Primary Insurance Amount (PIA). COLA adjustments and adjustments for claiming early/late are then applied to the PIA when you do claim. Here’s the detailed explanation https://www.ssa.gov/oact/COLA/Benefits.html#aime

The maximum monthly benefit changes each year. I’m not sure how it is calculated.

It’s calculated based on applying the bend point formula to the AIME of someone who had maximum earnings for 35 years and is retiring at their full retirement age. https://www.ssa.gov/oact/COLA/cbb.html

AJ

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"Actually, you can tell the estimator on the “My Social Security Account” page what your future earnings will be. It defaults to whatever your last reported year was but is easily changeable if you click the little down arrow. The actual catch is that if you are retiring early, the estimator only allows you to put 62 in as your earliest age of retirement. So, if you put a non-zero amount in for your future earnings, it will assume that you will make that amount until the date you’ve chosen for your retirement - which is at least age 62. "

the benefits calculated by that estimator (with retirement age fixed at 62yol), would be a low estimate, is that right?
I was a bit confused about that. I have used that calculator and left it at 62yol with forward earnings=0 since I won’t have a salary anymore that retain s.s. taxes, my highest earnings will be the incomes I got in those past 25 years. In those 25 years, I have had much higher income than my other years. So if my AIME is higher, I should get more benefits?

tj

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tj,

I don’t know your age, but just a quick review. You state that you have 25 years of much higher income. SSA uses your highest 35 years of earnings in the calculation. If the other years are much lower then that will reduce your benefit some. If you only have 29 years total then you would have 6 years of zero plugged into the calculation.

There are calculators in the other replies that will allow you to manually input all your earnings and get a closer estimate.
Also collecting at FRA - probably 67 for you, is the first calculation.

Collecting Early…
“In the case of early retirement, a benefit is reduced 5/9 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.”

Collecting Later… add about 8% per year for collecting later. From 67 to 70.

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Tj, The maximum amount you would collect if you collected in 2022 is listed at the bottom.

To get this max you would need to have contributed the max for 35 years of salary. The salary you make each year goes up quite a bit every few years. Here are some salaries over history that would get you max benefits. If you have 35 years of salary history, then each year of higher salary closer to max replaces a lower year that was below the max or zero years.
In 2021 your max contributing salary would need to be $142800.
In 2011 “. “ $106800
In 2001 “. “ $80400
In 1991 “ “ $53400

If your salary is above these then you are at the max those years. 35 years of salary at or above the max gets you the max payout. Most people are not in that range.

The maximum benefit depends on the age you collect. For example, if you collect at full retirement age in 2022, your maximum benefit would be $3,345. However, if you collect at age 62 in 2022, your maximum benefit would be $2,364. If you collect at age 70 in 2022, your maximum benefit would be $4,194.

The avg benefits for the nation collecting SSA is more like 1500 - 1800 at FRA. These numbers are for all recipients.

The calculations are complicated. You can’t just change the salary and then change the benefit by the same percent. Doesn’t work like that.

Get your statement of your SSA account and start with their estimates. Use the calculators to get an idea of how retiring early but not collecting will change your benefit.

the benefits calculated by that estimator (with retirement age fixed at 62yol), would be a low estimate, is that right?

It depends. There are multiple variables and you’ve only fixed one - the age you plan to stop working (i.e. your ‘retirement’ age. The other important variable is your future earnings until 62 (the retirement age you chose).

The benefits estimate would be correct if the future earning assumptions you documented are correct through age 62. It would be too high if the assumptions you documented show more earnings than you will actually have between now and 62. It will be too low if the assumptions you documented show lower earnings than you will have between now and 62.

And don’t forget - you don’t have to start collecting at your ‘retirement’ age. You can wait as long as 70 to start collecting, under current rules. The longer you wait to collect, the higher your benefit will be, given the same work history. That’s why the estimator shows benefit estimate at different ages.

AJ

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Several years ago, as my wife’s retirement was approaching, I set up a spreadsheet tab for my wife and I to calculate expected benefits at different ages, because we would be retiring early and a lot of the automated estimators didn’t handle that well. I could not figure out where I got the original formula. It might have been at the Social Security site

https://www.ssa.gov/oact/cola/piaformula.html

or from another website, or possibly here:

https://www.fool.com/retirement/whats-the-social-security-be…

For an accurate figure, you need to have your earnings history and a table of average Wage Indexing factors that the SSA uses. Tables are updated each year to account for inflation.

https://www.ssa.gov/oact/cola/awifactors.html

You also need the formula bend points for the year of eligibility from this table. The problem is, for us, that data is not yet available, so we just used the last figures available.

https://www.ssa.gov/oact/cola/bendpoints.html

This was a good reminder to check and see if anything else has changed in the calculation since I set this up, since I hadn’t yet adjusted for the most recent bend points.

You may find that a simpler estimator gives a good enough estimate rather than going through the steps to calculate it yourself.

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