The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: LAL on May 02, 2014, 10:04:05 PM
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How does it work for SS if you stop working before 62? I know you need 10 years or 40 working quarters and they average it out. How does all the zeros affect your SS calculations? Say you retire at 55 and have zeros for 7 more years?
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SS will average your top earning 30 years, so working for only 10 means you will have 20 zeros in your average.
It's not as bad as it sounds, though, as SS is designed to replace a higher percentage of lower incomes. So your benefit for 10 years of work is more than one third the benefit of 30 years of work at equivalent salary.
There is a calculator on the ssa.gov website that lets you specify an arbitrary stop-work date and your salary between now and then, and estimates your benefit at retirement age based on those partial earnings. Very handy.
Go here: http://www.ssa.gov/estimator/
click on "Estimate Your Retirement Benefits"
enter your info so they can pull your record.
it will estimate your benefits at ages 62, 67, and 70 assuming you work until that age. Ignore those.
Click on "Add a New Estimate" and tell it what age you intend to stop working and how much you will make on average between now and then.
It will tell you your new estimated benefit amount if you stop working then, but only at age 62.
You're welcome.
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This helped me understand it: http://www.ssa.gov/pubs/EN-05-10070.pdf
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SS will average your top earning 30 years, so working for only 10 means you will have 20 zeros in your average.
It's not as bad as it sounds, though, as SS is designed to replace a higher percentage of lower incomes. So your benefit for 10 years of work is more than one third the benefit of 30 years of work at equivalent salary.
There is a calculator on the ssa.gov website that lets you specify an arbitrary stop-work date and your salary between now and then, and estimates your benefit at retirement age based on those partial earnings. Very handy.
Go here: http://www.ssa.gov/estimator/ (http://www.ssa.gov/estimator/)
click on "Estimate Your Retirement Benefits"
enter your info so they can pull your record.
it will estimate your benefits at ages 62, 67, and 70 assuming you work until that age. Ignore those.
Click on "Add a New Estimate" and tell it what age you intend to stop working and how much you will make on average between now and then.
It will tell you your new estimated benefit amount if you stop working then, but only at age 62.
You're welcome.
Not the OP, but I'll say thank you. I didn't realize the estimator would do that!
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Here's an explanation of how it is calculated:
http://www.ssa.gov/pubs/EN-05-10070.pdf (http://www.ssa.gov/pubs/EN-05-10070.pdf)
This is also nice for people who don't have enough credits to use the estimator.
They calculate your highest average monthly salary for any 35 year period of your life, adjusted for inflation. Then they apply a regressive rate to calculate your monthly benefit.
90% up to $816
32% between $816 and $4,917
15% above $4,917
So if you make $342,720 over 35 years, you will get 90% of $816. You could do that with 10 years of making $34,272. Anything beyond that, the 32% or 15% rate is applied to.