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I am using this website to get an estimate of how much I will collect from SS at age 68. I have visited this site probably ten times and still find the results dubious.
I key in my identification information. I retired last year, but still earned about $71K, so I enter that where it asks for "last years earnings." When you select the "submit" button, you get an estimate of benefits if drawing at 62 and 66 1/3 (full retirement age).
I then select the button to "add another estimate" and use 66 as the age I will "retire" (meaning draw benefits) and enter 0 (zero) as the expected earnings between now and when I reach 66 (I'm now 58).
The result is showing ONLY $100 less than if I continued to work and earn $71K for the next 8 years. This just doesn't look right! Why would anyone continue to work and contribute to SS for an additional 8 years for only an additional $100 monthly benefit ?
Does anyone know if these results are accurate?
Here is the "cut and paste" results:
If you start your benefits: And you earn an average of: Your benefit will be about:
At age 66: $0 a year (from now until age 66): $2,518 a month
At full retirement (age 66 and 4 months): $71,000 a year (from now until full retirement): $2,613 a month
Only your highest 35 years are included in the calculation. All previous years are adjusted for inflation to the current year. Perhaps you already have 35 years of earnings? Perhaps 71k is not much higher than the year it is replacing? That could certainly explain it.
Also, you should expect a slight reduction for beginning benefits 4 months before FRA.
Unfortunately, I cannot create an account with the SS web site to see my historical earnings. I have worked more than 35 years. I'm estimating I maxed out my contributions for 20 to 25 years. However, during the first few years of my employment, I would have been contributing from a very low salary.
I tried replacing the 71K with 135K. The result if I continued to contribute from now until age 66 1/3 would be $2,729. That's still only $200 per month higher than if I stopped working now (which I have)... and I'm sure the final 8 years would fully replace the first 8 years of my 35 years of contributing that go into the calculation.
I started this exercise when I read an article on the YAHOO web site about maxing out your SS. It states that this year the max one can draw at full retirement age is $2,663. If that's true, then the $2,729 that I'm seeing must not be in today's dollars... right? Otherwise, it should be no more than $2663. But the web site states the amount is in today's dollars... so I'm still not convinced the results are accurate.
However, I also tried the "quick calculator" (http://www.ssa.gov/OACT/quickcalc/index.html) that doesn't reference your actual earnings history. After editing the earnings amounts they used to be more accurate, it is calculating approximately the same monthly benefit and it clearly states they are in today's dollars. Perhaps the SS administration is planning to increase the cap on benefits faster than inflation??? ... or perhaps these calculators haven't been designed to incorporate the cap.
Regardless, it appears the marginal gain in benefits declines DRAMATICALLY in the last few years of work. At least in terms of the incremental benefit in SS, it just isn't worth continuing to work if you've already got enough saved to retire.
At least from your comment, it sounds like you have faith in that web site and believe the results should be accurate.
Last edited by mitchmiller9; 06-15-2015 at 07:55 PM..
The calculator is most likely correct. SS is based on a formula that favors lower wage earners. The highest 35 years of salary that is subject to social security, indexed for inflation, are divided by 420 months (the number of months in 35 years) to provide an Average Income Monthly Earnings (AIME). The Primary Insurance Amount (PIA) which is the monthly amount of SS that a person would receive at Full Retirement Age (FRA) is then calculated using "bend points" for those retiring in 2015 at FRA:
90% of first $826 of AIME +
32% of AIME between $826 and $4980 +
15% of AIME above $4980
The bend points are the 826 and 4980. These are increased slightly every year but the 15, 32, and 90% stay the same. In your case of $2518 per month at FRA, your AIME is probably about $7953:
.90 x 826 = $743
.32 x ($4980 - 826) = .32 x 4154 = $1329
.15 x ($7953 - 4980) = .15 x 2973 = $446
The total of $743 + $1329 + $446 is the PIA or $2518.
I think you said you paid the maximum SS for 20-25 years so an AIME of $8K is not unreasonable. If you keep working to remove some of your lower salary years and replace them with higher salaries, you are increasing your AIME some but are only getting 15% of the incremental increase. And since the AIME is based on 35 years of earnings, a few additional years of higher earnings will not increase the AIME that much. As you correctly observed, the benefit of paying more years into SS is marginal (for higher earners with 35 years of earnings). But people need to do the math because it could be the other way where working a few more years to replace those early low salaries would be very beneficial.
FWIW, for several years before I claimed my benefits, I ran the Calculator with my actual earnings, and the actual benefits I am now receiving were accurate to within $50 a month.
Thanks ABQ. The 15% factor explains the lower marginal increase in benefits in your final years contributing to SS.
Thanks reed and texdav for sharing your personal experience that validates the results yielded by the calculator are accurate.
That's good news to me. I guess the calculators don't incorporate the "cap." So the marginal benefit is even less when the cap is applied. In my example, $2729 would be capped at $2663.
Thanks ABQ. The 15% factor explains the lower marginal increase in benefits in your final years contributing to SS.
Thanks reed and texdav for sharing your personal experience that validates the results yielded by the calculator are accurate.
That's good news to me. I guess the calculators don't incorporate the "cap." So the marginal benefit is even less when the cap is applied. In my example, $2729 would be capped at $2663.
There is no actual cap on benefits. What there is is a mathematical maximum that assumes all 35 "highest years" earnings were at those years wage deduction maximum.
I am using this website to get an estimate of how much I will collect from SS at age 68. I have visited this site probably ten times and still find the results dubious.
I key in my identification information. I retired last year, but still earned about $71K, so I enter that where it asks for "last years earnings." When you select the "submit" button, you get an estimate of benefits if drawing at 62 and 66 1/3 (full retirement age).
I then select the button to "add another estimate" and use 66 as the age I will "retire" (meaning draw benefits) and enter 0 (zero) as the expected earnings between now and when I reach 66 (I'm now 58).
The result is showing ONLY $100 less than if I continued to work and earn $71K for the next 8 years. This just doesn't look right! Why would anyone continue to work and contribute to SS for an additional 8 years for only an additional $100 monthly benefit ?
Does anyone know if these results are accurate?
Here is the "cut and paste" results:
If you start your benefits: And you earn an average of: Your benefit will be about:
At age 66: $0 a year (from now until age 66): $2,518 a month
At full retirement (age 66 and 4 months): $71,000 a year (from now until full retirement): $2,613 a month
I’m 60 and trying to estimate the differences of retiring between 62 verses 66 (full retirement). According to the calculator, if I retire at 62 my monthly benefit is; $1,994 a month and at 66; 2,653, a difference of $659.
Over the four years at the lower rate, I’d collect $95,712 that I wouldn’t have if I retire at 66. So if I hold off and start collecting at 66, it would take 12 years and I’d be 78 years old and possibly/probably dead before I would receive all that $95,712 back.
Am I missing something here, because it seems like such a no-brainer at this point?
I’m 60 and trying to estimate the differences of retiring between 62 verses 66 (full retirement). According to the calculator, if I retire at 62 my monthly benefit is; $1,994 a month and at 66; 2,653, a difference of $659.
Over the four years at the lower rate, I’d collect $95,712 that I wouldn’t have if I retire at 66. So if I hold off and start collecting at 66, it would take 12 years and I’d be 78 years old and possibly/probably dead before I would receive all that $95,712 back.
Am I missing something here, because it seems like such a no-brainer at this point?
So if you say it's a no-brainer for you based on the numbers you share, does that mean you don't expect to live beyond age 78 years?
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How to get a Earnings Statement
