unexpected early retirement and Social Security

Abby1930

21 years ago

I work for a large telecommunications company, one of the former Baby Bell's, and there is a possibility that our part of the company is going to be sold off. I am retirement eligible so I will probably retire in order to keep the benefits, pension and otherwise, that I have currently and will not have with the new company . I am too young (52) and with too many bills not to work, so I expect to pick up some other work to tide me over until I am 62, the age I originally planned on retiring at. This other job, whatever it will be, will undoubtedly pay far less than what I currently make with my baby bell. So my question is this..how is this going to affect my social security? My most recent paychecks prior to age 62 will probably be a good deal less ($10-20,000.00) then I make now. So will my 28+ years at baby bell be worthless as far as social security? Will it make a big difference? Just trying to figure out a whole lot of things here when I thought I had some job security. Hah!

Thanks.

Abby

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Comments (6)

sportsmom12
21 years ago
My husband is in the same situation. If I read information correctly- I think it either averages your income or takes the average of the highest ten years- I know they don't just take your last 10 years with it being the lowest.I hope somebody smarter than me posts.
joyfulguy
21 years ago
Abby1930,

In some pension systems, your contribution toward your pension is a percentage of your annual income and your pension at retirement relates to the amount that all of those years' contributions totalled out to, plus the amount of growth that all of those invested dollars produced throughout the period.

I hope that you can find some source of income which will be such that you can continue to enjoy your new home.

Lay-offs have become an increasingly common problem in the economy these days, where many companies feel that employees are as disposable as the machines that they use. Should we call such an approach "Kleenex staffing"?

They like loyalty on the part of staff - but if it isn't a two-way street, that rather traditional loyalty situation will be eroded.

In fact - it is, these days. Few employees feel as loyal to their employer as was true a generation ago.

Telecoms have certainly been volatile in recent years - and increasingly so?

While talking to my recently laid-off daughter (who had for several years been a counsellor to people being laid-off), she said that she'd like to have two or even three streams of income - so that she wouldn't be up the creek without a paddle if she suffered lay-off, having depended totally on one income.

She's a rather independent-minded person.

Who was able to carry on her recent work wherever she happened to be - all that she needed was a higher-grade connection to the internet. She used so much bandwidth that one couldn't call her and have the call go through while she was using the line for corporate-related internet work, as one can do with most internet users using high speed connection.

Good wishes to you as you work through your situation in the days ahead.

joyful guy

P.S. to others: If you should find yourself in this situation (say, next week?) - wouldn't it ease your concerns a great deal if you knew that you had enough assets rather easily available to enable you to survive without too much upset should you, having suffered the trauma of lay-off, find yourself unable to find other work for half of or even a whole year?

Personal financial advisors for many years have been recommending 3 - 6 mos. emergency fund to enable minimum survival. Such a plan is much more necessary in the employment climate, these days.

Don't you think?

I remember a song that was popular when I was young, ...

"Wishing, will make it so,
just keep on wishing,
and care will go."

"Dreamers tell us dreams come true,
it's no mistake
and wishes are the dreams we dream
while we're awake".

Baloney.

Visioning has its place. So do dreams - and wishes.

The problem is that quite a number of us allow the dreams and wishes to take the place of reality, rather than encouraging and impelling us to implement them - to change them from a figment of our imagination into a real part of our lives.

Dream the dream - then make it work. ...
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I will admit first that I don't understand it at all, but in my opinion it is the start of phasing out soc sec. I hear a lot about preparing for your own retirement and many are confident they can do it. BUT they can't count on even it being there. The good thing about Soc Sec is that it can't be taken away from you if a tragedy strikes you or your family. If you or a family member needs a heart or kidney transplant you will of course dip into the retirement fund to save your loved one's life. Or if you or your wife runs a red light and cripples someone you will take a huge loss and may pay the rest of your life. That is just two examples of how you can lose your retirement. We all need to write our representatives and ask them to fight any changes in soc sec. If they run low on soc sec funds they should stop sending money out of this country until their responsibility to the citizens are taken care of. We are very comfortable, I have prepared for this time in our lives....BUT there is one unexpected problem. Alzheimer's. If my husbands has to be placed in a care home, I will be ok, but only because we have a lot of assets. Anyone with less will lose most of their savings and their income. The saving thing for us is our soc sec and my husband's pension.
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My husband retired in January at 62, and I retired in April at 55. I am enjoying every day. He says he doesn't feel useful. I took some watercolor classes and am painting and doing crafts. I don't care if I'm useful or not! I stay up as late as I want, and sleep in if I want. Coffee on the back porch watching the birds in the mornings. Shopping when everyone else is at work. Doctor's appts during the day so I don't have to fight evening traffic. Love it. If you don't finish something today, there is always tomorrow. My elderly mother lives with us, so we can't travel unless someone she knows stays here. Luckily we have a neighbor who will stay with her if we need it, but we can't impose too much, so no traveling. But there is so much to do here (Charleston, SC), I really don't care about that. My hub is retired navy, and we each have a supplemental to Tricare through our previous employers. We pay our portion, but it isn't the full amount we would have to pay on our own. I am looking at volunteering with an animal rescue group, as that is also something else I wanted to do when I retired. This winter I'm starting on a cookbook, too. At least, that is the plan right now.
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That's exactly what I thought, kudzu. You refuse to accept the math simply because you don't trust the government. That's fine if it makes you feel good because, you think, you've managed to outsmart those sneaky old federal bureaucrats. I sincerely hope you're enjoying your retirement and the SS checks you've been receiving for these past years . What bothers me is that you're misleading others with bad advice about something that's very important for their futures. For example, you claim that the math is so complicated that neither you nor I can figure it out and that the breakeven point may somehow really be later than 78 because of "the time value of money" -- the fact that a dollar today is worth more than a dollar some years down the road. That's certainly true but a deferred SS benefit grows at the guaranteed rate of 7% interest each year for four years -- the rate is 8% for those who hold off four more years until they're 70 -- PLUS whatever rate the COLA is for that year. COLAS have averaged 2.5% for the last 10 years, BTW. Since the deferred benefits is larger each year, the COLA on the growing benefit will also be larger than the COLA for the static early benefit. Considering that, the real breakeven point is probably somewhat less than 78 years not more. The real truth is that the government knows that, no matter what it tells people about waiting to take SS, most (about two-thirds) will take it as soon as they can. Many of them have no choice because they truly need the money. Others may have serious medical problems that are likely to shorten their lives. But many just can't wait to finally get something back from SS after paying in for so many years. Or they're afraid SS will run out of money. Or, like you, they refuse to believe that the government's advice to wait could possibly be true. Of course, each one of the 66% who start taking at 62 costs the government less in lifetime benefits than any and all of those who hold off. The relatively few who hold off until 66 will cost it more and the even fewer (like me) who hold off until 70 will cost it the most. That's why the breakeven point can be set at a lower age than actual life expectancy. The majority who take early collectively create a large enough surplus to fund those of us who hold off taking until later. So I thank you for the contribution, however tiny, you will likely make to help fund the later stages of my retirement.
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Go see your Social Security Office. You'll should call and make and appointment first. As other posters have said, the rules are many. If you have also worked and paid social security taxes, that will be considered. Basically, the amount you might get is computed in several ways and then the maximum benefit one is used. The various cases may be (1) your wages and lifetime contribution alone, ( 2) 50% of your spouce's amount, or (3) if disabled, the disabled amount. If you were born after a certain date, the full retirement age is increased above 65. At one time, the full retirement age was to increase in steps from 65 to 67. I have been retired long enough to have lost track of the current rules. If you are elgible at age 65 for full retirement, you can take early retirement (as early as 62) with a reduction in payments. The reduction is based on the average life expectancy. When I retired, life expectancy was age 77, e.g., half of your population group will have expired by age 77. The reduction works out to be 5/9 percent per month early, thus if you retire 3 years early, the reduction is (36 months x .05)/9 or 0.20 which is 20%. Is this bad? It depends on how long you will live. If you do not expect to live beyond 77, then early retirement is not a loss. You loose only if you live beyond 77. Here's why. If you retired at the normal age of 65, then the time span to 77 is 12 years; if retired at age 62, the time span to 77 is 15 years. Check it out. You'll find that the total money paid out over the longer time is exactly the same as that of the shorter span. For example, suppose the normal payout was $100 per month. The amount for 12 years is 12 x 12 x 100 = 14,400. Now suppose that you retired 3 years early. The payout is $80 per month. The amount for 15 years is 15 x 12 x 80 = 14,400. After age 77, the early payout plan is less than the other and the difference increases each year. Since I retired, life expectancy may have increased to 78 years. These calculations give amounts based on the current value of the dollar. As time goes by, there are COLA increases that will increase the payout to offset inflation to some degree. In my experience, the SS cost increase numbers do not fully cover the real inflation of the basics.
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hamptonmeadow
20 years ago
Yes, it will effect your social security. The 10 year thing I think is a myth. They take your whole years. I worked for years and never made much money until the last 15 years. My ss was very low- $600. Now it is $900.
Not a lot of money. Fortunately my husband will be working and I get a small pension from the state. I also have health Insurance through my last employer (county), However it is very expensive ($600) but I will pay gladly since it pays for itself in perscriptions alone. I would be in real trouble if I had to rely on medicare.
Silverdove
20 years ago
Of course, it depends on whether Social Security is changed significantly between now and when you are eligible, however, at the present time, Social Security benefits are calculated based on your 35 years of highest INDEXED earnings. Earnings are indexed using a formula which considers the average wages for the year being indexed and the average for the second year before you attain age 62.

So yes, unless the law is greatly changed, your earnings for your current employer will make a difference.
kaleberg
20 years ago
Write your senators and congressmen to express opposition to any social security "reform" that reduces your future benefits. Right now, the plan that the president has proposed will reduce the benefits of everyone under 55, so you are right in the cross hairs. Pay attention; you can't afford to neglect this.
PeaBee4
20 years ago
You can request a report from SSA giving you a recap of your past earnings and SS contributions. I believe it will also tell you what your monthly check would be if you retire at 62. 10 years ago, they did not count either the first two or the last two years.

unexpected early retirement and Social Security

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sportsmom12

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