Random Social Security question: What if more than full time work?

[Villanelle]

This is not my situation.  I'm mostly just curious.  If someone was working three part time jobs at 20 hours a week, would they be credited with 1.5 quarters of work for the that time?  IOW, could they reach their minimum 10 years/40 quarters in less than 10 actual years? 

A quick google didn't bring me an answer and before I invest more time, I figured someone here might know.   

[reeshau]

It doesn't exactly work that way, although it is rated (minimally) by income.

From https://www.ssa.gov/pubs/EN-05-10072.pdf

"In 2020, you receive one credit for each $1,410 of earnings, up to the maximum of four credits per year."

What OT or multiple jobs will do is increase your earnings for the year, up until the max, and therefore increase your benefit.

[maizefolk]

Yup. So if you're close to qualifying for SS, but not quite, you can earn 4 credits by working just long enough into the new year to earn ~$6,000 and get your maximum number of credits for the year.

I qualified for social security much earlier than I otherwise would have as a result of working some extremely part time jobs in college that paid me enough to still get 3-4 SS credits per year.

[lhamo]

I qualified for social security much earlier than I otherwise would have as a result of working some extremely part time jobs in college that paid me enough to still get 3-4 SS credits per year.

Me, too!  I got 4-5 years worth of credit due to the 1.5 years I worked PT at the library in high school + my PT jobs as an undergrad.  Sadly by the time I was in grad school they had stopped taking SS payments out of grad student stipends.  It meant more takehome pay at the time, so I voted for it, but in retrospect it would have been better to have more years of credits earlier.

[Alternatepriorities]

Semi-related question:

Is there a way to easily calculate what the SS benefit will be if you stop working years before reaching retirement age? I've had the required 40 credits for years now, but the SSA site only predicts benefits if I keep earning what I did the previous year...

[maizefolk]

Semi easy and very rough.

Look up your annual reported earnings on the social security website. Multiply each year's earnings by the "Index Factor" for that year you can get from plugging 2020 into this website. https://www.ssa.gov/cgi-bin/awiFactors.cgi

Add them all up and divide by 35. (If you've worked for more than 35 years, only add up the 35 highest earning years).

If this number is < ~12,000, your annual social security payment would be 90% of this number.

If this number is between $12,000 and $72,000, your annual benefit is roughly equal to  (your number - $12,000) * .32 + $10,800.

If this number is >$72,000 your annual benefit is roughly equal to  (your number - $72,000) * .15 + $30,000

Obviously your actual benefit will be higher because it'll continue to be adjusted for inflation until you get close to retirement age but this gives you a sense of what your benefit worth in inflation adjusted dollars if you stopped working today and draw SS at full retirement age.

...Or you can put your numbers into this calculator and put in 0 for "amount you expect to earn in 2021"

https://www.ssa.gov/benefits/retirement/planner/AnypiaApplet.html

[lhamo]

The "case study spreadsheet" that @MDM has developed and posted somewhere on this site (there should be a sticky pointing to it) has a lovely Social Security page on it where you can put all your earnings history in and it will spit out an estimate for you.  Very nice (and appreciated tool)

[MDM]

The "case study spreadsheet" that @MDM has developed and posted somewhere on this site (there should be a sticky pointing to it) has a lovely Social Security page on it where you can put all your earnings history in and it will spit out an estimate for you.  Very nice (and appreciated tool)

Not quite a sticky, but usually toward the top in Forum Information & FAQs: Case Study Spreadsheet updates

[ender]

Semi-related question:

Is there a way to easily calculate what the SS benefit will be if you stop working years before reaching retirement age? I've had the required 40 credits for years now, but the SSA site only predicts benefits if I keep earning what I did the previous year...

ssa.gov used to make this possible but has seemed to have changed as I couldn't find it the last time I was on it.

[Paul der Krake]

https://www.ssa.gov/OACT/quickcalc/

By "retirement date," we mean the month in which you intend to stop working. We assume that this is also the month for which you want benefits to begin. However, if you enter a date before you are eligible for benefits, we will assume you want to start receiving benefits at the earliest possible age (age 62).

[terran]

Semi easy and very rough.

Look up your annual reported earnings on the social security website. Multiply each year's earnings by the "Index Factor" for that year you can get from plugging 2020 into this website. https://www.ssa.gov/cgi-bin/awiFactors.cgi

Add them all up and divide by 35. (If you've worked for more than 35 years, only add up the 35 highest earning years).

If this number is < ~12,000, your annual social security payment would be 90% of this number.

If this number is between $12,000 and $72,000, your annual benefit is roughly equal to  (your number - $12,000) * .32 + $10,800.

If this number is >$72,000 your annual benefit is roughly equal to  (your number - $72,000) * .15 + $30,000

Obviously your actual benefit will be higher because it'll continue to be adjusted for inflation until you get close to retirement age but this gives you a sense of what your benefit worth in inflation adjusted dollars if you stopped working today and draw SS at full retirement age.

...Or you can put your numbers into this calculator and put in 0 for "amount you expect to earn in 2021"

https://www.ssa.gov/benefits/retirement/planner/AnypiaApplet.html

Other than using approximations for the bend points (where the percentage of income counted changes), this is actually a very precise way of doing it. The actual monthly bend points can be found at https://www.ssa.gov/OACT/COLA/bendpoints.html, so just multiply the First and Second columns in the "Dollar amounts in PIA formula" column by 12 to get the values to replace $12,000 and $72,000 in maizefolk's calculations. For 2021 those are $11,952 and $72,024, so even the approximations aren't far off. Note that as the bend points increase in the future, the ~$10,800 and ~$30,000 will also increase as those are just 90% and 32% of the first and second bend points respectively.

Also, if your total lifetime income divided by 35 is over ~$70,000 then you also get 15% of that overage up to the social security wage base, which for 2021 is $142,800

Or you could just use MDM's calculator :-)

[Alternatepriorities]

Thanks everyone! This is what makes this forum some helpful and generally awesome.

[Alternatepriorities]

Curiosity won today and I wandered from my scheduled work into the realm of FI calculations...

One thing I'd like to confirm: "plugging 2020 into this website. https://www.ssa.gov/cgi-bin/awiFactors.cgi" is actually plugging in the year I could start collecting full benefits ('47 in my case)

Assuming I understood that right (and the SS remains solvent) you all have given me some excellent news. Including SS, DW and I are definitely FI!

[MDM]

You might not want to make highly specific plans based on projections that have to survive 27 years of markets and politics, but your understanding of what the site purports to show seems accurate. :)

[Alternatepriorities]

You might not want to make highly specific plans based on projections that have to survive 27 years of markets and politics, but your understanding of what the site purports to show seems accurate. :)

Excellent! Not planning to do anything rash... although I think I think I will stop pretending to work and go bake some bread this afternoon to celebrate.

Using the formula more than tripled my previous "meh" estimate of what SS would contribute to my retirement. It did also reduce the "meh" guess for DW by 30%, but on average we'll get at least twice what I assumed from SS.

[maizefolk]

Curiosity won today and I wandered from my scheduled work into the realm of FI calculations...

One thing I'd like to confirm: "plugging 2020 into this website. https://www.ssa.gov/cgi-bin/awiFactors.cgi" is actually plugging in the year I could start collecting full benefits ('47 in my case)

Assuming I understood that right (and the SS remains solvent) you all have given me some excellent news. Including SS, DW and I are definitely FI!

Huh. I had no idea that website would estimate indexing values for years which haven't yet occurred.

It breaks the formula I posted a bit.

1) Wage growth could be faster or slower than they estimate and;
2) The number you are coming up with in in 2047 dollars, not 2020 dollars. It looks like the website is calculating 3.5% wage growth per year in the future. If we assume inflation tracks wage growth, that would make a dollar in 2047 buy about as much as forty cents today;
3) Compensating in the other direction, by 2047 the amount of lifetime earnings that count towards the 90% bucket (and the 32% bucket) will be substantially higher than it is today.

Personally I find it easier to calculate what my social security income would be if I turned 67 today (which is what you are calculating if you plug 2020 into that website) and then just assume that number will keep up with inflation from now until I actually turn 67.

[Alternatepriorities]

Curiosity won today and I wandered from my scheduled work into the realm of FI calculations...

One thing I'd like to confirm: "plugging 2020 into this website. https://www.ssa.gov/cgi-bin/awiFactors.cgi" is actually plugging in the year I could start collecting full benefits ('47 in my case)

Assuming I understood that right (and the SS remains solvent) you all have given me some excellent news. Including SS, DW and I are definitely FI!

Huh. I had no idea that website would estimate indexing values for years which haven't yet occurred.

It breaks the formula I posted a bit.

1) Wage growth could be faster or slower than they estimate and;
2) The number you are coming up with in in 2047 dollars, not 2020 dollars. It looks like the website is calculating 3.5% wage growth per year in the future. If we assume inflation tracks wage growth, that would make a dollar in 2047 buy about as much as forty cents today;
3) Compensating in the other direction, by 2047 the amount of lifetime earnings that count towards the 90% bucket (and the 32% bucket) will be substantially higher than it is today.

Personally I find it easier to calculate what my social security income would be if I turned 67 today (which is what you are calculating if you plug 2020 into that website) and then just assume that number will keep up with inflation from now until I actually turn 67.

To do it that way, do you backdate your earnings accordingly? (in my case that mean subtracting 27 years)

[maizefolk]

No, you'd use the correction factors you get for the year you earning the money, when you put 2020 into the calculator.

Every year for the next 27 years (if the assumptions SS projects into the future are correct) each of those correction factors will go up about ~3.5% and each of the numbers in the formula I posted will also increase by ~3.5%, so the amount of money you'd receive from social security will increase by ~3.5%.  ... but inflation will also mean each dollar will only be worth about ~96.5 as much, so it all comes out in the wash.

[Alternatepriorities]

No, you'd use the correction factors you get for the year you earning the money, when you put 2020 into the calculator.

Every year for the next 27 years (if the assumptions SS projects into the future are correct) each of those correction factors will go up about ~3.5% and each of the numbers in the formula I posted will also increase by ~3.5%, so the amount of money you'd receive from social security will increase by ~3.5%.  ... but inflation will also mean each dollar will only be worth about ~96.5 as much, so it all comes out in the wash.

Thanks. That is a less exciting result, although it still more than my original guess.

[maizefolk]

I feared that might be the case (that part of your excitement might be getting a result in future dollars).

But the key thing to take away is that the first $400k or so of lifetime earnings helps your social security payout a lot. After that the additional benefits achieved by continuing to work are proportionally a lot smaller. So the gap between the benefits a person would get if they stopped working today and the benefits they'd get if they worked a full 35 years are usually smaller than we'd intuitively guess.

[Alternatepriorities]

I feared that might be the case (that part of your excitement might be getting a result in future dollars).

But the key thing to take away is that the first $400k or so of lifetime earnings helps your social security payout a lot. After that the additional benefits achieved by continuing to work are proportionally a lot smaller. So the gap between the benefits a person would get if they stopped working today and the benefits they'd get if they worked a full 35 years are usually smaller than we'd intuitively guess.

Yeah, that is a an interesting and important point. I'm beyond the first bend point and self employed so I did some less enjoyable math... In exchange for 12.4% of this years earnings I get .91% of those earnings back per year 27 years from now. And fewer homeless retirees today...

[maizefolk]

Yeah.

Still, even at the age of forty, it'd be quite hard to find the annuity that'll pay out an inflation adjusted 7.4%/year*. It's not nearly as good a deal as before the first bend point but it's not a terrible deal either, at least until you hit the second bend point (around 2.5M in lifetime earnings). And the reduction in homeless old folks is nice too.

But I remember the first time I found out about, and had to pay, self employment tax. Reasoning aside it felt (and still feels when I have to pay it today) horribly unfair.

*.91/12.4

[Alternatepriorities]

Yeah.

Still, even at the age of forty, it'd be quite hard to find the annuity that'll pay out an inflation adjusted 7.4%/year*. It's not nearly as good a deal as before the first bend point but it's not a terrible deal either, at least until you hit the second bend point (around 2.5M in lifetime earnings). And the reduction in homeless old folks is nice too.

But I remember the first time I found out about, and had to pay, self employment tax. Reasoning aside it felt (and still feels when I have to pay it today) horribly unfair.

*.91/12.4

Do they sell annuity products that don't pay out for 27 years? I've never looked for such a thing. I've always argued that while SS isn't a great ROI, it's an important safety net. My father who never made big money is living well off moderate SS with his property paid for and a productive garden hobby...