I’m getting close to retirement time and wondering about how my benefit will be determined. I am not finding a definitive answer about something and hoping someone can give me a simple answer to a simple question.
I understand most of how they determine your benefits, but they mostly mention ‘income’ without defining just what they mean by it.
When they are looking at your income to determine which are your best years, are they going by your gross income or your net (taxable) income?
I have years where my gross income was not very high, but I had enough to pay taxes and live on with a fair amount to spare. Then there are some years where my gross was twice as high, but after my expenses, I was barely able to get by.
In earlier years, I made enough and had fewer deductions and paid more in taxes. In later years, I grossed more but after deductions, paid little or no income tax.
I would assume that SS pays based on net income. It would be odd that the years I made more money but paid little or no tax would determine what I am entitled to get back.
The only income that matters is what you paid SS tax on. I.e., so-called “payroll” income. It will have a “FICA” line on a pay stub. SS doesn’t care in the least about “net” income, income from other sources (interest, investments, etc.), and so on.
Go the SS web site. Set up an account. Log in. They will tell you how much SS taxed income you got for each year. They will also estimate for you how much your SS benefits will be based on past and projected future income.
Agree, the Soc Sec website will show you your earnings record that your benefits will be based on.
The problem with their quickie projection of benefits though, is that it’s based on taking your most recent full year and assuming you will make that same amount each year until your official full retirement age.
They do have a desktop app tool available for download called AnyPIA which will let you create as many scenarios as you want based on future earnings and retirement dates. It’s only semi-intuitive, but if you play around with it for a couple of hours you should get the hang of it.
Based on several calls leading up to retirement, I’ve come to the conclusion that one hour is baked into their phone system. However, the last time I was offered the option of leaving a callback number so at least I didn’t have to sit on hold. And they did call me back — in one hour.
When I saw this thread, this is the question I was going to ask. I’m 58 and looking at retiring in a year or two. Their online calculator projects my current income, or maybe increases in current income, until I hit retirement age, but if I retire early it should be different. It’s assuming more high-income years replacing the lower-income ones from 35 years ago.
Thanks for the reference. I’ll look for that. A couple of hours?!? It should be called AnyPITA in that case.
You think the federal government knows how much you and every other American pays out for rent, mortgage, groceries, vacations, internet services, laundry, hookers etc.?
And there’s a cap on that amount. For 2019, it is $132,900. So if you made more than the max cap amount, your benefit you will receive will only be based upon the cap.
I walked in to my local SSA office in the middle of an afternoon without an appointment on June 13th of this year and waited 20 minutes. Saw a live person face-to-face. Got my three questions answered in a friendly and comprehensive manner and she even pointed out a factoid I was unaware of, to my benefit. Your mileage may vary, of course.
The person who walked in the door side-by-side with me was seen in 10 minutes.
Interesting that you assumed I meant “call them on the phone” when actually I went to a physical office in person.
I went to the social security office last week at 11:30 am and was seen within 15 minutes, had my form for a new social security card accepted within 5 minutes and still had time to pick up lunch before I went back to work. My card arrived in 4 days.
My mom had someone try and redirect her direct deposit into another account 3 weeks ago and called the social security office to put a freeze on her account. She was on the phone for 90 minutes and was done. That really surprised me that they were able to take action that fast. I actually tried to make an online account for her afterwards and was denied so I guess it was worth the 90 minutes she spent talking with them.
Social security is based on gross income. That’s what both you and your employer paid 6.2% each into FICA for (there’s medicare in FICA too, but that’s another story). As had been mentioned up thread, there is a SS cap at $132,900 in 2019. Anything above that isn’t taxed.
SS takes your high 35 years to compute what your benefit will be. Usually you will receive a letter annually from the SSA telling you what your benefit would be at 62, your full retirement age, and at your max at 70. I think you can sign up online to get that information as well. I know you can sign up for that in a SS office.
By and large it makes sense to take social security as soon as you can. The exception is if the spouse with the lower SS amount has a higher life expectancy, and you would image that they would take that higher amount and live on that for a fair amount of time. The adage that one should wait for a longer amount of time and they will make more with SS is a bit of a fallacy.
Actually, my plan is to start collecting “widow’s benefits” on my late spouse’s account as soon as I qualify at 60, then start collecting on my private pension at 65, then on my SSA account at 70 (at which point I stop getting widow’s benefits) when my amount maxes out (my amount is greater than my spouse’s). Again, YMMV. Heck, MMMV if my circumstances change sufficiently, all that is some years down the road.
Apparently wait times vary. I walked into a local SSA office recently. Had to wait 30 minutes to get in the door. Another 30 minutes once in the door to get a number. Then a 3 hour wait to be called. On the bright side, the clerk was very informative and helpful.
We are doing that. My wife is getting 1/2 of my SS. When she turns 70 she will start drawing her SS. By the age of 74 she will have made up for what she lost by waiting.
It’s absolutely your gross income, not net. If you have a 401(k) or other pretax deductions from your paycheck, compare the figures for Wages/Tips (box 1) versus Social Security wages (box 3). Box 5 is Medicare wages, which usually matches box 3 (but if you hit the limit for Medicare taxability, might be less).
Anyway: box 3/5 will always be more than box 1 if you have any pretax deductions. Box 3 is the figure you’ve paid SS on, and is the figure they use in calculating your benefit.
High 35 (for some reason I remembered it as High 40) means they calculate your benefit using an average of what you earned in the 35 highest-paying years of your career. Those will usually be the most recent 35, but if you’ve scaled down your hours or otherwise taken a pay cut, might not be. I wonder how they do the math for someone who’s worked less than 35, but earned a lot during those years… would someone who worked 17.5 years earning 100,000 a year get the same benefit as someone who worked 35 years earning 50K a year?
I took SS eight months before my full retirement age. My main consideration is that I was still working free-lance, and they reduce your SS payment proportional to your earnings before retirement age - but not in the last calendar year before you reach it. (I am simplifying a little.)
I calculated what my “break-even” point was based on the additional income I received those eight months, vs the reduction in monthly payments for taking SS early. It turned out to be at about the age of 82. So I win if I die before 82, while SS wins if I live longer than that. I hope I lose!
