Yes, it’s the 35 highest pay years - which are often but not always the last 35 years.
Yes. Highest paid as corrected for inflation.
If you started your paper route at age 15 and worked to age 70 you’ll have 55 years of wage history. They’ll correct them all up last year’s inflation, and pick the 35 biggest, then average those. That’s your “lifetime average annual earnings” measured in last-year dollars.
The SSA used to publish a worksheet that would let you estimate your monthly benefits for early and full retirement based on your life’s history of eligible income. They no longer do that but the old publications are still available online. The most recent one I could find allows for entries as recent as the year 2017:
https://www.ssa.gov/pubs/EN-05-10070-1956.pdf
Even though it is outdated I found it helpful for understanding the sort of inflation adjustments that are made to previous years’ income, and it can be recreated as a spreadsheet that allows you to get a sense of how different scenarios for remaining years’ income will affect your expected benefits.
You can still do it if you create a mySSA account. It will include the SSA’s records of your individual lifetime earnings.
Have they finally incorporated the full calculation with inflation correction, showing their work, etc., or do they still just show your actual SS earning for each year and leave the rest a mystery for you to try to look up elsewhere on the 'net?
The latter. If you do find the full version on the net, particularly one where you can incorporate various hypotheticals (like “what if I stopped working at 60, 65, etc. but didn’t collect SS until 70?”) please do report back.
I have shilled for the tool below several times in several threads. It does all that and more. It is NOT free. But for $40 for a 1 year unlimited use subscription you can run a lot of scenarios. e.g.
What if I earn X, Y, and Z for the next few years, retire at date Q, and my spouse dies at 69 while I live to 98, what’s the best answer? What if I die at 71 and she lives to 77? etc.
Check out [u]**https://maximizemysocialsecurity.com/**[/u]
Totally worth the price. Their retirement planner (sold separately at [u]**https://maxifiplanner.com/**[/u]) is a darn nice tool too if you don’t already have access to a Monte Carlo-style simulator.
Thanks! I may have to go for that one of these days.
I can’t see keeping the annual subscription for the SS planner past the first year. It just takes a few hours to exhaust all the scenario permutations. And only a few minutes to set up the unchanging basics; e.g. your 1988 earnings aren’t going to change.
The only reason I’d re-subscribe to the SS planner is if there was a material change in the SS laws and regulations, somebody died or got remarried, etc. IOW some large curveball that I didn’t already run scenarios for.
At 62+, I’m close enough to mandatory retirement that the full-up financial planner isn’t too valuable past the first year’s subscription either. I’ve run enough scenarios to know roughly where my guardrails are under plausible market & inflation & age assumptions.
If I was 35 I might well re-buy every 5 years as a check-up. And of course if politics destroys the USA then all bets will be off and we’ll all be eating dog and sleeping under bridges.
Thanks for the helpful links, LSLGuy.
Yeah, if I was 35 I might do a whole lotta things differently. 
mmm
Yeah, and it’d be epic. That’s the only word for it: epic.
Thirded, fourthed etc…
When I did that crunching last week, I found that my highest-earning year - when adjusted for inflation - was 2003. Adjusted for inflation, it’s worth about 12% more than my salary right now.
My third highest year, adjusted for inflation, was 1993. I earned less than half my present salary but for the SS formula, it’s worth about 10% more than my current salary.
If I were to switch to a part-time schedule - let’s say 60% of my current pay rate - that year’s income wouldn’t be in my top 35 years at all. It would help me by delaying when I had to start drawing my Social Security and thus reduce that 8%/year hit, of course.
Thanks for the original post, My mom had felt kinda bad that she took SS payments at age 65 after the ss agent said she was making a mistake. She’s now in her 70s but didn’t feel that she lost anything for taking earlier payment!
Good for her. This is so complex, I think we have to make the best decision we can with the tools we have available, then make peace with it.
mmm
Well, that’s what I’m asking: why would this work this way when so many of the delayers would die before collecting? Even if the government cut the ROI back to 6% past age 70, I’d probably still go for that. My point is that they could find numbers that work so they WOULDN’T lose money by allowing people to delay collecting SS benefits because a certain fixed number of them would have died before collecting a nickel they were entitled to. “Passing laws is hard” really doesn’t cut as an answer–hard laws are what get passed, all the time.
They could certainly find numbers that would work. The problem would the politics- anyone thinking of proposing or voting for such a law would factor in the effect it would have on their re-election campaign. And although internal regulations aren’t political in the sense that politicians vote for them, the guy at the top still gets blame/credit for them.
My employer ( a state agency) offers a benefit whereby my unused sick leave is converted to a monthly credit toward my health insurance premiums. This of course relies on actuarial tables - they updated the tables about 10 years ago since people were living longer. The already-retired people were outraged, although it wouldn’t affect them, the close-to-retired people were outraged and some opted to retire earlier than planned to get the larger credit and even people 25 years away from retirement were mad. The only thing that saved the politicians was that it applied to a relatively small percentage of the population - which won’t be the case for changes in SS.
I propose this because I can’t be the only retiree who
- can get by on my non-SS income, but
- might live to 110 when those income sources might dry up.
At age 110 (or 95, or whatever) I may need the SS benefit (probably need it) to survive but the likelihood is that I will die solvent before then, so I would gladly let my SS benefits remain untapped until that date, growing at 8% (or whatever) until then. If those benefits double every seven years or so, my income levels would never decrease, and I’d be protected against outliving my money.
I’d sign up for this in a flash and I’d bet there is a way to structure this so that the government comes out ahead and the retires are still happy with the plan. After all it needn’t be mandatory, just available to those in a situation like mine.
Here’s an open source calculator that looks at various scenarios. I’ve used it and it closely matches the calculations I’ve gotten from the Social Security administration.
A lot of people get hung up on squeezing the last nickel out of their social security to their detriment. Given that you have enough money to live on; there’s certainly more marginal utility to a dollar when you’re 65 than when you’re 85, and that’s what waiting to collect does, it exchanges dollars today for dollars 20 years from now.
Agree there’s more marginal utility at age 65 than 85 but only provided you’ve got broadly the same amount of income from other sources at both ages.
Where the logic falls apart is in my or @Roger_That’s or many other people’s scenarios. Folks who do not have any kind of a 3rd party pension other than SS, but do have a decent pile of assets to fund a more generous retirement than SS alone. But not so much assets that the income / growth on those assets alone, after retaining enough income / growth to cover inflation, provides the retirement income we aspire to.
I have no expectation of limiting my retirement spending to income only. I fully intend to burn through a lot of principal on the way to the grave. Keeping SS as the one and only inexhaustible source of money for the end game if I get (un?)lucky enough live long enough to burn through most of my principal is one of the key pillars of being willing and able to burn through that principal.
For us, running out of money, or at least needing to reduce our consumption to a very small fraction of our age 66 consumption is a very real possibility IF one lives to 90+. Under that scenario, every dollar of SS income one can count on at age 95 is another ten dollars of assets one can spend down at age 68 for fun. Maybe a lot more than ten; I haven’t run out the numbers in detail.
Speaking of pensions…
I have a modest pension from my current workplace, but I don’t want to get too comfortable with the notion that it will always be there for me.
I say this because once upon a time (35 years ago) I was full vested in a pension from my first employer. The company went bankrupt and shuttered its doors decades ago, which means, apparently, that pension went bye-bye.
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Am I correct that pension #1 is long gone? (seems to me it should have been protected in some way, but I don’t know)
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Pension #2 - My current employer has been in existence for, I dunno, 130 years. Should I lose any sleep over this pension’s mortality?
mmm