Anyone consider Social Security "Bend Points" for deciding when to FIRE?

[rantk81]

I've got a nice 'stash.  I could probably do lean-to-medium FIRE now if I was willing to move to a lower COL area.  There are some complexities/uncertainties in my life-situation right now that makes me feel better to keep working for the time being.  Most of my planning for FIRE completely ignores Social Security benefits.  That being said, if I do include planning for Social Security, it seems to push my FireCalc.com scenarios from being in a "kind of iff-y" category into being in the "almost certain success" category of success-and-failure-scenario-graphs.  I ran a few SS calculators, and it appears that I'm only a few more years away from hitting the "second bend point" of AIME on the SS benefits curve.  After that point, additional earnings really won't move the needle very much in terms of SS benefits.  I think I might tentatively plan on setting my FIRE date to be when I hit that 2nd bend point.

Anyone else think along similar lines?  Even still, I'm probably working way longer than I have to.  Maybe I'm slowly transitioning into a Boglehead instead of a MMM'er!

[Paul der Krake]

I think it primarily depends how early you FIRE. Someone looking to quit at 50 needs a portfolio that's less robust, so it makes sense to look into it. Someone who does it at 30, it's almost completely irrelevant.

I've looked into it and determined I would get a baseline amount no matter what. It's nice, but it doesn't change anything.

[PDXTabs]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

[CoffeeR]

I think I might tentatively plan on setting my FIRE date to be when I hit that 2nd bend point.

Anyone else think along similar lines?  Even still, I'm probably working way longer than I have to.  Maybe I'm slowly transitioning into a Boglehead instead of a MMM'er!

SS is a fantastic deal if you are before the first bend point. It is a so-so deal between the 1st and 2nd bend points. It is a lousy deal (financially) after the second bend point. I would advice anyone who is close to 40 quarters of SS credited work (minimum needed to draw SS) to get those 40 quarters in at minimum (regardless of bend points). IMO there is no better return on investment out there. After that 40 quarters, it certainly can make sense to continue working until you hit the first or second bend point (depends on your personal financial situation). Delaying FIRE after the second bend point for the purpose of additional SS payments is probably a flawed decision (to be kind in my sentiment).

[achvfi]

Can anyone recommend good resources to makes sense of bend points and benefit estimations? Thank you

[BECABECA]

It would be worth it to me to delay to hit the first bend point, but I personally wouldn’t delay to try to hit the second. I’m already past the first bend point (and already retired), so earning more SS credit won’t be a factor in any decision to take a part time gig in retirement.

As for factoring it into your FIRE calcs, you could factor in just 75% of your estimated benefit and then decide when to RE based on that, since if you’re my age it’s only projected to be funded at 75% when we would draw on it.

[Xlar]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I have a similar question: What is a good calculator that doesn't assume you work until you collect benefits? i.e. say your 30 and will work until 40, not until your 62. So your income from 40-62 is $0.

If your retirement income comes from 401k to Roth conversions, does any of that amount count as income for SS? I don't think it does but I realize I don't actually know for sure!

[BECABECA]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I have a similar question: What is a good calculator that doesn't assume you work until you collect benefits? i.e. say your 30 and will work until 40, not until your 62. So your income from 40-62 is $0.

If your retirement income comes from 401k to Roth conversions, does any of that amount count as income for SS? I don't think it does but I realize I don't actually know for sure!

No, SS income has to be earned income from a job that SS benefits get taken out of, so the Roth conversions wouldn’t count towards that.

For calculating, I used this site, which lets you set 0 as the amount you make going forward:
https://www.ssa.gov/OACT/quickcalc/
Then I log into the SSA website and get my total lifetime income earned and make sure adding up all the estimated earnings from the quickcalc are pretty close to my actual. It’s annoying that they’re both on the SSA site but you can’t get it to just pull your actuals from when you’re logged in. Maybe there’s a way but I haven’t figured it out.

[FIRE 20/20]

I've got a nice 'stash.  I could probably do lean-to-medium FIRE now if I was willing to move to a lower COL area.  There are some complexities/uncertainties in my life-situation right now that makes me feel better to keep working for the time being.  Most of my planning for FIRE completely ignores Social Security benefits.  That being said, if I do include planning for Social Security, it seems to push my FireCalc.com scenarios from being in a "kind of iff-y" category into being in the "almost certain success" category of success-and-failure-scenario-graphs.  I ran a few SS calculators, and it appears that I'm only a few more years away from hitting the "second bend point" of AIME on the SS benefits curve.  After that point, additional earnings really won't move the needle very much in terms of SS benefits.  I think I might tentatively plan on setting my FIRE date to be when I hit that 2nd bend point.

Anyone else think along similar lines?  Even still, I'm probably working way longer than I have to.  Maybe I'm slowly transitioning into a Boglehead instead of a MMM'er!

It sounds like you're right where I was about 2 years ago, when I estimated I would need to work until ~March 2020 to hit the second bendpoint.  That's when I initially set my planned FIRE date, although that had more to do with expecting to hit 25x planned expenses without SS.  Due to cutting expenses, increased savings, and market returns (I assumed 0% growth for 2018 & 2019) we are far past our number, so we FIRE'd before hitting the second bendpoint. 

I think it's a point that's nice to be aware of so you know when additional work will have essentially no impact on your SS benefits.  However, because I am extremely conservative when it comes to finances I still don't count SS in my plans.  If in 10-15 years when I'm in my mid-50s it looks like SS is going to pay out something to me then maybe I'll increase my 'stache withdrawals to do some extra travel, but that's about the extent that SS plays into my plans. 

[BECABECA]

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

[Cassie]

I wouldn’t want a lean fire.  You don’t want your retirement to hinge on moving to a LCOL.  You want options. Also as you age you will want more creature comforts. I used to tent camp but at 65 we use a old RV with a real bed. HI and out of pocket costs are our biggest expense ranging between 9-12k/year.  Once you have more free time you will have the time and energy to do more things. Not everything is free or cheap.

[FIRE 20/20]

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

That's what I did.  It's probably obvious to you, but someone who isn't familiar with how SS works should be aware of the index factors that go into your lifetime earnings for this calculation.  This link has the 2019 index factors and income limits:
https://www.ssa.gov/pubs/EN-05-10070.pdf

You can use that form to find the bendpoints - they are in step 5.  If you put the form into Excel you can pretty easily game out when you'll hit the bend points in the future. 

[Xlar]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I have a similar question: What is a good calculator that doesn't assume you work until you collect benefits? i.e. say your 30 and will work until 40, not until your 62. So your income from 40-62 is $0.

If your retirement income comes from 401k to Roth conversions, does any of that amount count as income for SS? I don't think it does but I realize I don't actually know for sure!

No, SS income has to be earned income from a job that SS benefits get taken out of, so the Roth conversions wouldn’t count towards that.

For calculating, I used this site, which lets you set 0 as the amount you make going forward:
https://www.ssa.gov/OACT/quickcalc/
Then I log into the SSA website and get my total lifetime income earned and make sure adding up all the estimated earnings from the quickcalc are pretty close to my actual. It’s annoying that they’re both on the SSA site but you can’t get it to just pull your actuals from when you’re logged in. Maybe there’s a way but I haven’t figured it out.

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

That's what I did.  It's probably obvious to you, but someone who isn't familiar with how SS works should be aware of the index factors that go into your lifetime earnings for this calculation.  This link has the 2019 index factors and income limits:
https://www.ssa.gov/pubs/EN-05-10070.pdf

You can use that form to find the bendpoints - they are in step 5.  If you put the form into Excel you can pretty easily game out when you'll hit the bend points in the future. 

This is very helpful, thank you!

[achvfi]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I have a similar question: What is a good calculator that doesn't assume you work until you collect benefits? i.e. say your 30 and will work until 40, not until your 62. So your income from 40-62 is $0.

If your retirement income comes from 401k to Roth conversions, does any of that amount count as income for SS? I don't think it does but I realize I don't actually know for sure!

No, SS income has to be earned income from a job that SS benefits get taken out of, so the Roth conversions wouldn’t count towards that.

For calculating, I used this site, which lets you set 0 as the amount you make going forward:
https://www.ssa.gov/OACT/quickcalc/
Then I log into the SSA website and get my total lifetime income earned and make sure adding up all the estimated earnings from the quickcalc are pretty close to my actual. It’s annoying that they’re both on the SSA site but you can’t get it to just pull your actuals from when you’re logged in. Maybe there’s a way but I haven’t figured it out.

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

That's what I did.  It's probably obvious to you, but someone who isn't familiar with how SS works should be aware of the index factors that go into your lifetime earnings for this calculation.  This link has the 2019 index factors and income limits:
https://www.ssa.gov/pubs/EN-05-10070.pdf

You can use that form to find the bendpoints - they are in step 5.  If you put the form into Excel you can pretty easily game out when you'll hit the bend points in the future. 

This is very helpful, thank you!

Thats awesome! You all made it so much easier to understand it. Thank you!

Looks like I am well past the first one, still long way to reach second one. Now its time for me to nerd out on some calculations.

[seattlecyclone]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I have a similar question: What is a good calculator that doesn't assume you work until you collect benefits?

I also recommend that form for anyone looking to better understand how it works.

In a nutshell, you put in your past wages for each previous year, cut off any amount above the social security tax limit for that year, and scale them up to account for inflation.

You take the top 35 inflation-adjusted years (including zero-earning years if you had wage income for less than 35 years) and add them up to get your lifetime earnings.

Then they have you divide it by 420 to get a monthly figure, but I consider that to be a distraction when you're looking at the bend points with FIRE in mind. Instead, let's look at the bend points from the perspective of your scaled lifetime total wages.
The first bend point is at $388,920. Hit this number exactly and you get a monthly benefit of $833.40 at your "full retirement age" (which is incidentally not the age at which you can get the highest monthly benefit).
The second bend point is at $2.34 million. In this range you add $833.40 to your benefits for every $1.09 million you earn.
Above $2.34 million, you need to earn $2.33 million more in order to get another $833.40.

[simonsez]

Yes, but indirectly (the bend points are built into the formulas to give me my expected monthly/yearly S.S. income). I have it in a spreadsheet I update once a year with earnings info plus the inflation-multipliers for past years.

It wouldn't be too hard to do some marginal dollar analysis if you had an estimate for your longevity but two things:
1. Frankly, I'm not FIREing anytime soon so I haven't bothered.  If you have 35 * 12 * the first bend point amount ($926 in 2019) in career S.S. wages, that will be the most "efficient" way to earn Social Security as that fills up the entirety of the 90% bend point.
2. I think getting your 10 years to qualify for S.S. is more important than worrying about spilling over into a higher bend point with the formula.

To break this down a little for those that haven't calculated it on their own - You figure out your highest 35 earning years (inflation-adjusted, current year multiplier is always 1.0) in terms of S.S. wages including averaging zeroes as needed assuming you have the requisite 10 years or 40 quarters of employment while paying FICA.  The payout formula for the first bend point is 90%.  There are 420 months in those 35 years and your avg monthly S.S. wages amount across those 420 months is called your PIA (primary insurance amount).  In 2019 if you found your PIA to be $926 or less, your monthly S.S. benefit would be 90% of that amount.  If your PIA is above $926 but under $5583, you get 90% of $926 PLUS 32% of the difference.  That 32% is the second bend point.  You can see that each marginal PIA dollar above $926 is much lower compared to the first bend point.  PIA values above $5583 use 15%.  But of course keep in mind each marginal PIA dollar really represents $420 of income while paying FICA.

Edit: seems this info has been posted while I was writing this post, more or less the same thing said slightly differently.

[BECABECA]

Yes, but indirectly (the bend points are built into the formulas to give me my expected monthly/yearly S.S. income). I have it in a spreadsheet I update once a year with earnings info plus the inflation-multipliers for past years.

It wouldn't be too hard to do some marginal dollar analysis if you had an estimate for your longevity but two things:
1. Frankly, I'm not FIREing anytime soon so I haven't bothered.  If you have 35 * 12 * the first bend point amount ($926 in 2019) in career S.S. wages, that will be the most "efficient" way to earn Social Security as that fills up the entirety of the 90% bend point.
2. I think getting your 10 years to qualify for S.S. is more important than worrying about spilling over into a higher bend point with the formula.

To break this down a little for those that haven't calculated it on their own - You figure out your highest 35 earning years (inflation-adjusted, current year multiplier is always 1.0) in terms of S.S. wages including averaging zeroes as needed assuming you have the requisite 10 years or 40 quarters of employment while paying FICA.  The payout formula for the first bend point is 90%.  There are 420 months in those 35 years and your avg monthly S.S. wages amount across those 420 months is called your PIA (primary insurance amount).  In 2019 if you found your PIA to be $926 or less, your monthly S.S. benefit would be 90% of that amount.  If your PIA is above $926 but under $5583, you get 90% of $926 PLUS 32% of the difference.  That 32% is the second bend point.  You can see that each marginal PIA dollar above $926 is much lower compared to the first bend point.  PIA values above $5583 use 15%.  But of course keep in mind each marginal PIA dollar really represents $420 of income while paying FICA.

Edit: seems this info has been posted while I was writing this post, more or less the same thing said slightly differently.

It’s nice to have the 2019 numbers... I’ll need to update my equation for those, thanks!

[rantk81]

Per my calculator, the current AIME bend points are at $926 and $5583.

[Scortius]

Per my calculator, the current AIME bend points are at $926 and $5583.

A more intuitive way to look at those numbers may be to multiply by 420 (12 months * 35 years). That will represent how much you need to report as SSA taxable income over your entire career to achieve those points.

$926 * 420 = $388,920 in SSA taxable career earnings. You will receive credit for 90% of these earnings.
$5583 * 420 = $2,344,860 in SSA taxable career earnings. You will receive credit for 32% of these earnings past the first $389k
Anything beyond that, you gain 15%, but if you work longer than 35 years, you also lose credit for your lowest year moving forward.

These numbers will be slightly different for each person depending on their retirement age as inflation calculations will differ.

[FIREstache]

I wouldn't ignore SS benefits anymore than I would ignore one of my bank accounts with a wad of stash in it.

I've calculated that I can reduce my WR% from about 3.5% down to 2.2% after 10 years of FIRE when SS kicks in at age 65, or even less if I wait until 67 or 70.

I'm not concerned about the bend points.  I'm already up a ways on the curve and have already calculated my benefits for various ages of starting benefits and how they would change by working an additional year (not much).

[John Galt incarnate!]

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

I enjoy doing financial math with a wooden pencil, a piece of  loose leaf, and a hand-held calculator.

[OurFirstFire]

I've put together a spreadsheet for calculating SSI benefits with assumptions of future earnings, using the guidance publication, attached here.  It is fun playing with the scenarios, and in most cases realizing that a lot of extra work (and taxes!) only yields a tiny extra benefit.

[BicycleB]

What a great set of replies to an interesting question!

I considered the bend points, but focused more on calculating a number for "minimum income I actually expect from Social Security, depending on different scenarios of when I retired and whether or not I ever return to work."

My main consideration related to bend points was: Being between the first and second bend point, I am aware that I can expect some benefit from SS due to further work. Retiring early, which I did, therefore meant that if I found pleasant optional work in future, I would still get moderately good SS returns from that work. Working all the way to the second bend point would have reduced the value of optional future work. I chose to get more free time, while preserving higher return on any paid work I choose to do in future.

Haven't done much paid work in retirement yet. But the future is still available, SS benefits and all!

[Bateaux]

Wow!  That's a lot of mental work to project a payment to you, that could be bankrupt before you see a dime.  Unless you are much older than me (50) I'd consider SS to be lagniappe.

[Ozymandiaz]

I think very few people understand bend points, or how the system works, even though it's really pretty simple.
You need at least 10 years of earnings to even qualify.
All of your years are adjusted to today's dollars (i.e. if you made 30,000 this year, it would be 30,000, but if you made 20,000 ten years ago, it might be 28,000 in today's dollars). The SSA website has the data if you want to create an excel spread sheet.
Anyway, your top 35 years are averaged. If you have more years, the lower one's are lost. If you have less, your average is still divided by 35.
You end up with an average yearly wage.
These are roughly the numbers I remember...
You get back 90% of the first 10,000.
You get 32% of the next amount up to 45,000.
You get back 15% of anything over that.
Everyone should try to at least have 35 years at 10,000, or 18 years at 20,000, etc, to get the 90% payback.
After that, the 32% payback is pretty good, but the 15% payback is not very good incentive. Of course, it's the lower rates that allow everyone to get the 90% on the first 10,000.
I like to think in annual amounts instead of monthly amounts.
And of course, there's the "issue" that by the time I can collect, SSA will only bring in 75% of what it needs to pay out the promised benefits. I'd guess the 90% will stay, but 32% might get cut to 25%, and 15% cut to 10%.

[Laura Ingalls]

I just calculated for myself and the difference between not ever having another dime of earned income and having an earned income of $40k for 20 more years only produced ~$200 per month income.  I have long since passed the first bend point and am also unlikely to reach the second.

[fuzzy math]

Per my calculator, the current AIME bend points are at $926 and $5583.

A more intuitive way to look at those numbers may be to multiply by 420 (12 months * 35 years). That will represent how much you need to report as SSA taxable income over your entire career to achieve those points.

$926 * 420 = $388,920 in SSA taxable career earnings. You will receive credit for 90% of these earnings.
$5583 * 420 = $2,344,860 in SSA taxable career earnings. You will receive credit for 32% of these earnings past the first $389k
Anything beyond that, you gain 15%, but if you work longer than 35 years, you also lose credit for your lowest year moving forward.

These numbers will be slightly different for each person depending on their retirement age as inflation calculations will differ.

Its important to note that those #s work for earnings up to the SS limit and for time periods of under 35 years. I appreciate the simplification but the way its written it can be misinterpreted.

As for me - I will happily hit FIRE right around that 2nd bend point. Some of my SS earnings record years are for $4k or so but I plan to retire at ~25 years of earnings so they will never be replaced. This thread has been a nice reminder not to overvalue SS in my retirement portfolio.


Sent from my iPhone using Tapatalk

[MaybeBabyMustache]

So, I'm at $2M & change of taxed SS income. I can achieve the next bend point (which, I understand to be $2.344M) in three more years of working. I could likely get there, but am not sure I want to with work. How can I calculate the variance between where I'm at now & my expected benefits? I'm currently at an expected benefit of $3k/month, assuming a retirement age of 67. Is the $5583 number below the amount I'll receive if I stick it out to the next bend point? So, and additional $2500/month or so?*

*Obviously, assuming the system stays in place as it currently is.

[seattlecyclone]

So, I'm at $2M & change of taxed SS income. I can achieve the next bend point (which, I understand to be $2.344M) in three more years of working. I could likely get there, but am not sure I want to with work. How can I calculate the variance between where I'm at now & my expected benefits? I'm currently at an expected benefit of $3k/month, assuming a retirement age of 67. Is the $5583 number below the amount I'll receive if I stick it out to the next bend point? So, and additional $2500/month or so?*

*Obviously, assuming the system stays in place as it currently is.

That $2,500/month seems way too high for three more years of work. Between the bend points you get 32% of your indexed average monthly income as a benefit. Assuming you have less than 32 years of work history at this point, working three more years at $100k per year would add $300k to your lifetime record. Divide by 420 (the number of months in 35 years), and that $300k turns into a $714 increase to your monthly average. Multiply that by 32% and you would be looking at an additional benefit of $228 at your full retirement age.

[rantk81]

So, I'm at $2M & change of taxed SS income. I can achieve the next bend point (which, I understand to be $2.344M) in three more years of working. I could likely get there, but am not sure I want to with work. How can I calculate the variance between where I'm at now & my expected benefits? I'm currently at an expected benefit of $3k/month, assuming a retirement age of 67. Is the $5583 number below the amount I'll receive if I stick it out to the next bend point? So, and additional $2500/month or so?*

*Obviously, assuming the system stays in place as it currently is.

I would advise you to do a little bit of research on how social security benefits are calculated -- as there are a few things in your post that lead me to believe that you are working under incorrect assumptions.

Number one is, the calculator you are using that is estimating your $3k/mo benefit with retirement age of 67 -- that is making the assumption that you continue to earn the same salary that you are earning now, until you reach age 67.  This obviously wouldn't be the case if you pulled the plug at the 2nd bend point.  As an example, for my scenario, with very similar lifetime earnings (at age 37), if I quit working now, and didn't earn another dime of income towards social security, my monthly benefit at age 67 is projected to be a little bit over $1900.

And secondly, the $5583 figure is the AIME (average indexed monthly earnings), NOT a benefit value amount.

[sol]

a lot of extra work (and taxes!) only yields a tiny extra benefit.

Right.  I did spend a lot of my time running through the wage-adjusted calculations, only to come to this same conclusion.  It's basically irrelevant.  As long as you've already hit the first bend point (around $300k of lifetime earnings) then you're golden.  Any lifetime income above that only contributes to your eventual SS benefit at 32% or 15%, but the cutoff between those two is basically irrelevant for pushing someone over the "should I retire today" threshold.  Because at that point, the additional year of income you can make by staying on far outweighs the additional SS benefit you'll accrue by doing so.

So yea, go ahead and do the math.  Just don't expect it to make any difference in your FIRE decision.  You should FIRE when you have amassed enough assets, not when SS hits some magic diminishing returns.

[SwordGuy]

Oh, but then I realized I could just use the actual equations instead of monkeying with an estimator website, so that’s what I prefer:

Your monthly benefit at regular retirement age is:
Your lifetime inflation adjusted earnings from SSA, divided by 35 years, divided by 12 months
Now for the portion that is up to $895, you get 90% of that each month
Now for the portion that is above $895 but below $5397, you get 32% of that each month
Now for the portion that is above $5397, you get 15% of that each month

So if you hit the first bend but haven’t gone above $5397, then your equation is this:
= (0.9*895)+0.32*(((LifetimeEarnings/35)/12)-895)

added the important inflation proviso to earnings.

[SpareChange]

a lot of extra work (and taxes!) only yields a tiny extra benefit.

Right.  I did spend a lot of my time running through the wage-adjusted calculations, only to come to this same conclusion.  It's basically irrelevant.  As long as you've already hit the first bend point (around $300k of lifetime earnings) then you're golden.  Any lifetime income above that only contributes to your eventual SS benefit at 32% or 15%, but the cutoff between those two is basically irrelevant for pushing someone over the "should I retire today" threshold.  Because at that point, the additional year of income you can make by staying on far outweighs the additional SS benefit you'll accrue by doing so.

So yea, go ahead and do the math.  Just don't expect it to make any difference in your FIRE decision.  You should FIRE when you have amassed enough assets, not when SS hits some magic diminishing returns.

Sums it up perfectly...

[BicycleB]

As long as you've already hit the first bend point (around $300k of lifetime earnings) then you're golden.  Any lifetime income above that only contributes to your eventual SS benefit at 32% or 15%, but the cutoff between those two is basically irrelevant for pushing someone over the "should I retire today" threshold.  Because at that point, the additional year of income you can make by staying on far outweighs the additional SS benefit you'll accrue by doing so.

So yea, go ahead and do the math.  Just don't expect it to make any difference in your FIRE decision.  You should FIRE when you have amassed enough assets, not when SS hits some magic diminishing returns.

Once again, @sol distills something down to the most important thing more clearly than I could ever do. Two thumbs up.

[clifp]

Part of my reason for retiring at 39 was running the numbers (At the time I was retiring there weren't many calculators out there other than one on the Social Security website).  The difference between retiring at 39 and working till  50 was only $300 odd dollar per month.

[FIREstache]

The best answer is to calculate it for yourself.

For some time, I've been using the downloadable detailed calculator to estimate my benefits.
https://www.ssa.gov/OACT/anypia/anypia.html

It allows you to put your wages in for each year and put in an estimated income for any number of additional years you plan to work, as well as when you start to draw your SS benefits, and you can see how much difference it makes.

Rather than just figuring the difference in benefits between years that you stop working, you can see how much more you can get by delaying taking your benefits, such as waiting until age 70, which makes a significant difference in your benefit vs. taking them at age 62.

[chasesfish]

I have thought about it, but I haven't run the numbers yet. What's a good SS bend point calculator?

I used the one posted at Physician on FIRE.

It didn't directly effect our date, but it tells me if we bring in some extra money in retirement and either spouse is going to pay social security taxes on it, its better to recognize that income in my wife's name.  She lost a chunk of her 20s to vet school and it would help her more than me.

[Classical_Liberal]

I agree bend points are basically meaningless after the first.  Edit: A very easy way to look at this is to make your own spreadsheet for projected SS income.  It takes minutes. Then, when you update your other financial information every month (or how ever often), add in the updated annual income to see how it affects your benefit.  It's really not very impressive once you do it a few times.

A couple of very important side notes when using SS in your simulations. 

#1 Realize that it's only currently funded for about 3/4ths of current benefit amounts.  So use this information how you choose.  Personally, I bet it'll get strengthened with some last minute legislation, so anyone in the 40's to 50's age range will probably benefit from this, having not been taxed through most of their working lives on what will invariably be a payroll tax increase. Personally though, I only use 72%, which is the current projection.

#2 is a bit nuanced. If either your spending is low (hopefully it is, this is MMM), your time to SS in less than 30 years, and/or your benefit is rather large, simulations can be a bit misleading.  Not success rates per se, rather your actual financial situation.  Quick example.  Think of someone who only spends 30K a year and is planning on 25K of SS benefits.  Well, in order to show simulation success,  your stache only really needs to last until that SS benefit.  So it's very possible several of the "successes" at a higher WR have you drawing down significantly before the SS buffer kicks in.  Meaning, yes, you'll be fine, but you may only have 50K left at age 67, or whatever.  So you need to look at the max drawdown points too.  Just to make sure you feel comfortable with the potential of having SS as pretty much all of your later life financial security. 

[FIREstache]

In addition to the potential cuts to benefits by the time you draw SS, there's also a greater percentage of SS benefits that are becoming taxable each year.  Since the thresholds for taxation haven't been indexed to inflation since they were created decades ago and probably won't be in the future either, you should probably figure 85% of your SS will be taxable.

https://www.fool.com/retirement/general/2016/05/08/this-33-year-old-social-security-rule-is-wreaking.aspx
http://www.foxnews.com/story/2007/03/25/double-whammy-taxation-social-security-benefits.html
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

[Arbitrage]

I recognize them, but they don't drive anything.  Certainly, it devalues whatever contributions we make to social security after hitting that second bend point (not there yet, and may never get there, especially DW).  I just take into account whatever our PIA values are, whatever the payouts will be (potentially de-rated by 23%), and factor those in to the entire picture. 

[jim555]

I'm shy of the second bend point.  Not going back to work to get over it.

[SwordGuy]

I sat down and did the math to see how much working each extra year would get me in SS. 

Once you're past the 2nd bend point it's not really worth the bother just for the extra SS.

[Arbitrage]

I sat down and did the math to see how much working each extra year would get me in SS. 

Once you're past the 2nd bend point it's not really worth the bother just for the extra SS.

Yeah, if I do a quick quote on a deferred SPIA, the SS cost/benefit isn't too bad if you ignore the employer contribution and unknown future potential reduction in benefits.  Yes, I know the employer contribution is real, and they could pay more otherwise, etc. etc., but just from a marginal impact standpoint the SS is decent before that second bend point (lower payout, but not really when you consider the survivor/spousal benefits, disability, etc.). 

After the second bend point it's a slam-dunk awful investment, not that we really get to choose it in that manner.

[SwordGuy]

I sat down and did the math to see how much working each extra year would get me in SS. 

Once you're past the 2nd bend point it's not really worth the bother just for the extra SS.

Yeah, if I do a quick quote on a deferred SPIA, the SS cost/benefit isn't too bad if you ignore the employer contribution and unknown future potential reduction in benefits.  Yes, I know the employer contribution is real, and they could pay more otherwise, etc. etc., but just from a marginal impact standpoint the SS is decent before that second bend point (lower payout, but not really when you consider the survivor/spousal benefits, disability, etc.). 

After the second bend point it's a slam-dunk awful investment, not that we really get to choose it in that manner.

Forgot to mention that it's an even worse investment when you've already got 30 years of decent income behind you.   

[rantk81]

Forgot to mention that it's an even worse investment when you've already got 30 35 years of decent income behind you.

fixed it for ya

[Arbitrage]

Forgot to mention that it's an even worse investment when you've already got 30 35 years of decent income behind you.

fixed it for ya

Certainly, though that's not an issue for most on this board.

[SwordGuy]

Forgot to mention that it's an even worse investment when you've already got 30 35 years of decent income behind you.

fixed it for ya

Not really.  When your income is (and has been) at or above the 2nd bend point for most of your 30 year career, you really don't get much more SS for an extra year or 5 of work.   Not compared to having to slog to work for 5 years, for sure!

[rantk81]

I know I know. I was just making the point that if there is some person who has 35 years of earnings at the wage-base-limit, and then works an additional year, they'll get exactly zero additional benefit.

[GetItRight]

I do not include any welfare in my retirement planning. It is foolish to do so as the State can change anything it wants at any time with no notice. I will not gamble the rest of my life on welfare.

Mod edit: No trolling please.

[Scortius]

I do not include any welfare in my retirement planning. It is foolish to do so as the State can change anything it wants at any time with no notice. I will not gamble the rest of my life on welfare.

1) Social Security is not 'welfare' in the traditional sense, though I'm guessing you know that and are trying to make a point and bait a response.

2) Society would collapse before SS benefits went away completely. Tens of millions of US citizens are and will be completely dependent on it and despite political posturing, no one is going to willingly be the one to touch it.