First of all, there are no dumb questions, esp when dealing with soc sec.

If you leave early, your benefits will be based on your earnings up to when you stopped working, so clearly that would be less than if you continued to work and pay into the system. Then they apply the ratio of how much benefits you will receive based on your age when you start collecting. (Be careful as the full retirement age ramps up based on your birth year...I believe mine is not until I hit 66 1/3.) So if you collect earlier, you will receive less each month as you are presumably receiving it for a longer period of time. If you postpone, then each payment will be larger because you will be receiving it for fewer years.

Also, if you are married, please note that when you reach 62, you can start to receive half of your spouse's soc sec. Then when you reach full retirement age, you can start collecting the full amount based on your own income without having a reduction in payment, because based on your own income, you have not started collecting early.

Perhaps the attached link will help

Here is a link that might be useful: retiring early

Annie, I thought my social security amount would be based on my 5 highest earning years, which are long behind me.

I thought if I quit work at 62 (or even 52, having put in the term and the 5 basis years) and start taking benefit at 70, my amount would be the same as it would be if I worked to 65, 66, or 70?

From soc sec:

Many people wonder how their benefit is figured. Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or âÂÂindexedâ to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or âÂÂprimary insurance amountâÂÂ. This is how much you would receive at your full retirement age -- 65 or older, depending on your date of birth.

So it is based on the 35 years in which you earned the most money. Presumably, if you continued working, you would make at least as much, if not more....inflation, pay raises, promotions....than you would if you retired early. (Though of course not necessarily...say you quit a full time position and started working part time.) So the amount included in the 35 years would be greater than if you stopped working.

The 5 years may apply to some pension plan calculations.

The SS Department used to send out those nice letters that illustrated what your benefit would be according to the age you retired and also how much you earned. It went up every year that you continued to pay into the system. I think you can get the same info on their web site, so you should look for that.

I was married for more than ten years (you have to be married at least ten years to collect your spouse's SS). I am collecting on my ex-husband's SS (not the entire amount - a percentage), and will switch to my full SS at age 70. My payment will be much larger that way and presuming I live awhile, I will collect more money over the years. If I die, I wont care.

Your payment is definitely not based on your five years of highest income. It's based on what you have paid in over the years. The web site has all the info you need. I also went to my SS Office and talked to a wonderful woman who made everything very clear for me. You have to make an appointment in advance.

Jamies....I think what matters is WHEN you start collecting...the amount it is based on is the same ...your contributions, etc.......so, I think if you say get $1000 at 62, and $1500 at 66 (or whatever your full retirment age is) and $2000 at 70...then I think it follows that if you collect at 64 you would get around $1250 and at 68 around $1750. You will get more the longer you hold off collecting because you will be collecting it fewer months/years. I think that's how it works, but I could be wrong. It's really kind of a crap shoot. You could retire at 62 and hold off collecting till 66 but die at 64. Some people would need it at 62, others can hold off..depends on your financial situation.

I found this article. As soon as I read it and looked at a couple of the links to the SS website, I called my sister. She is divorced and takes care of our elderly mom (lives with her). She was married to her ex for 13 yrs. She is 63.

She is making an appt today to check into to her Ex's SS benefits.

Thanks for bringing up the topic Running. Maybe the article will answer some of your questions.

Here is a link that might be useful: Link

And if you are widowed, you can collect on your deceased spouse's account when you reach age 60, but if you are still working, your wages will be deducted. So it's really only a benefit if you want to retire early. You can then switch to your own account's benefit on down the road, if your account would provide a higher benefit.

I don't think my question is answered anywhere. Can I try again?

1. Born 1952.
2. Full/normal retirement age is 66.
3. No spouse consideration.

case #1. Let's say I stopped working at 55 after having worked 35 years. Top earning years were from age 40 to 45. I do not start collecting ss when I quit working at 55. I wait.

case #2. Let's say I kept on working past age 55 to age 66. Still had 35 years in by age 55, and top earning years were same. But I went to a 30 hour week in a different job I never made as much money again.

Then, no matter which case, I claim ss at full retirement age.

Would I get more in case #2 than in case #1. I 'm thinking no?

In case #2, overall lifetime earnings are higher, but both cases meet the 35 year requirement, and both cases have the same highest 5 years.

Lifetime earnings and age at retirement are the figures to use. The longer you earn and pay in, the more money in your acct. The longer you postpone retirement, the larger percentage of that $$ you get each month.

But your lifetime benefit (how much you will actually get before you die) depends on both of the above plus how long you live.

Disclaimer: not a social security expert, informed consumer.

Running, pensions (employer) and social security operate differently. To answer your second question, there is an 8 percent PER YEAR increase in the social security benefit for every year social security is DELAYED AFTER reaching your full retirement age, until age 70.

Jamie's, Case 1 is not applicable because social security is not available at age 55. Some employer persons ARE available at 'early retirement' age 55.

Generally, 3 key things come into play when making a decision about when to claim social security benefits:
1. Life expectancy - do you expect to live beyond the actuarial tables?
2. Are you eligible for spouse or survivor benefits?
3. Are there other retirement savings, ie, pensions, available.

As Annie stated, some individuals chose to collect 1/2 of their spouse's social security benefit between their full retirement age and age 70. This allows the individual's ss benefit to increase by that 8% per annum. This could be financially prudent IF one had longevity in the family AND possibly other retirement savings to tap.

NOTE: the President's 2015 proposed budget includes the following: "eliminate aggressive social security claiming strategies to maximize delayed retirement credits."

The 'rules' regarding social security make my hair hurt.
~bgj

jamies,

I found this interesting story about 'Janet' in the link above. It may help you.

"Myth 1: Social Security payments are based on your last 10 years of work (or 5, or 15, ...). �" False

Your Social Security payments are based on your lifetime average earnings. For retirement payments, SSA uses your best 35 years of work, indexed for inflation. (Fewer years are used for mid-career death or disability.)

"Myth-understanding" the 35-year average can cause a wrong turn. For example, meet Janet. She was born in 1950 and had high lifetime earnings. Janet longed to retire at 57. But she thought that Social Security was based on the last 10 years, so she worked five more years at maximum earnings to avoid a big Social Security cut. At 62, she learned that the extra years of work yielded exactly $57 per month. Sure, it's more, but if Janet had known that number at age 57, would she have kept working for five more years?

To avoid an "oops," get a Social Security estimate. Sign up at ssa.gov/myaccount to get estimates anytime. Then tailor the estimate to any retirement scenario you're considering (like early or partial retirement), using SSA's online calculators . "

That is interesting My3.

Janet was earning her same big money those last few years. I guess it would have been even less than $57 if she hadn't been earning near her lifetime high.

I had actually heard that someone who took a little job in the pre-twilight / pre-claim years ended up with LESS social security than she would have if she had not worked at all after 60!
I did contact ss about this today and the rep was not too helpful, even though she consulted her manager 3 times.
She did indicate that "lifetime" earnings come into play at some point after they take the 35 highest years and calculate the average index monthly and the PIA. But she couldn't point me to a document that explained where, in the calculation, the lifetime earnings fit.

AIME- avg indexed monthly earnings is put into a formula to calculate PIA-primary insurance amount.

However, google 'recalculation of Social Security benefits'. "For every year that your earnings (past age 60) exceed the lowest of your previous 35 years, you'll have an increase in your ss check."

So, if you've become a high wage earner late in a decades long career, that can favorably impact benefits. And note, FICA taxes capped at $113,700 in 2013.

Another consideration:
Most employers allow employees to take benefits on a pre-tax basis. Some employees working past 60 choose to take the benefits post-tax to maximize social security wages. Best to do the math to determine the most favorable financial outcome.

~bgj

"To answer your second question, there is an 8 percent PER YEAR increase in the social security benefit for every year social security is DELAYED AFTER reaching your full retirement age, until age 70."

Thanks, but I am still confused :). So between the first full retirement age and 70 YO the benefit ncreases regardless of whether the person is still paying in as long as s/he doesn't take benefits

But does the benefit that is available if one stops working at, say, age 62 keep increasing until full retirement age? In other words, if my benefit at age 62 is $1000, I stop working but don't claim..what.is my benefit at full retirment age? is it still $1000 because I haven't continuing to pay in? Does it increase by 8% annually as with waiting between FRA and 70?

I have used the interactive calculator feature on the ssa.gov page,but I haven't been able to find the answer to my question about how benefits are calculated for people who stop working but don't claim.

Running, maybe the attached will help you.

I am elegible for full SS benefits when I turn 66. I stopped working when I was in my 50s.

My expected full benefit has stayed the same as when I stopped working except for the addition of some cost of living raises.

Yes, if I had continued to work and be paid more my benefit would have been higher because SS uses the average of highest lifetime earnings to calculate benefits.

ML

Here is a link that might be useful: Social Security

runninginplace :
Contact Social Security. They will be able to give you a definitive answer. It costs nothing to call them. They have the exact data for your situation. None of the Gardenwebbers have your employment history, how much you have paid into Social Security, how many quarters you have credited to your employment history. All this figures into the amount you collect when you retire. Social Security can tell you if you retire early at what age you will receive more money than if you retire at age 66. Remember, if you retire at age 62, you collect money from SS for four years that you wouldn't collect if you retire at age 66.

jamies, if you continue to work, you may improve your benefit payout if the amount you earn in those last 11 years exceeds the lowest earnings in your early working years. So, for example, if you work an additional 11 years and make, say $30k per year, but in the first 11 years in your career you made $15k, then your benefit amount will increase because the best 35 years worth of earnings will be higher. Also, you can't collect soc sec until you reach age 62.

I think it's important to understand that the calculation is a two-step process.

The first is to calculate your benefit based on your best 35 years of earnings. That will give you your benefit amount.

The second step is based on when you start collecting. The sooner you collect, the smaller your monthly payment will be as you will be collecting longer. If you postpone collecting, then your monthly payment will rise as you will be collecting for a shorter period of time.

So, for example, suppose actuarially you are expected to live to 85 and they calculate your benefit based on that. At 65 they will expect to pay you benefits for 20 years. If you start collecting at 62, then they will expect to pay you for 23 years. If you start to collect at 70, then they will expect to pay you for 15 years. Thus, your benefit payout gets adjusted based on the estimated number of years you will be collecting.

But the initial amount of benefit, prior to that adjustment, is based on your 35 years earnings.

Running...good ?s.

"So, between Full Retirement Age and 70 YO the benefit increases regardless..." YES, this is the delayed retirement credit. Caveat: the 8% annual increase is applicable for those born in 1943 or later.

Your second question is a bit of a challenge. SS benefits (PIA) are based on FRA. Example: individual born in 1957 is eligible at age 66 and 6 months. IF the benefit is taken at age 62, it is actuarially reduced.

Example: An individual taking SS at age 62, who has a FRA of 67, will have a 30% reduction in monthly benefit.

Questions regarding the impact of continued earnings later in life, depend upon where the individual falls within the 35 years of earnings. Higher, or lower earnings will have an impact.

~bgj

Wait-billygoatjoe mentions some employees take benefits post tax to maximize SS wages---would investing in a 403B REDUCE my SS wages???????

Running, I hope by this time you are thoroughly convinced that yours was NOT a dumb question!

Peegee...good observation.

Wages, for purposes of AIME, are reported to SS via the W2.

Box 1 on the W2 reports 'federal taxable wages' and Subtracts 403b deductions for federal tax purposes.

Box 3 reports 'SS taxable wages' and there is NO deduction for 403b contributions.

Box 12e reports 403b contributions for taxpayer info only.

So, 403b contributions reduce federal taxable wages. 403b contributions do NOT reduce SS earnings for AIME.

"Trust but verify"
~bgj

"The 'rules' regarding social security make my hair hurt."------love it!!!