7 Replies Latest reply on Dec 13, 2013 1:50 PM by herbyreed

    Social Security

    redbird32303
      I recently started a new job at 63.  The job is with a government entity that does not contribute to Social Security.  (There is an alternate retirement fund that will be available to me at retirement that is not the state pension.) I have 33 years of paying into Social Security and plan to retire at 70 to get the full benefit.  What effect, if any, will working 7 years without Social Security contributions have on the final benefit?
        • Re: Social Security
          Since SSI is based on your age at the time you start to collect and your highest 10 years income. The only reflection on the result of those calculations would be your current (new) job does not contribute, therefore, will not be considered in the calculation.  On a side note, I would like to add that currently you can collect full (for your age) SSI at 66 without penalty for earned income.  (This is what I am doing.) In my case my current job is still contributing, therefore, once I stop working the SSI will be recalculated considering the income I am getting now in the "highest 10" calculation. 
            • Re: Social Security
              chrlsrchrdsn
              That has been changed, it is highest 35 years.

              Also If you retire at 62 and you end up making over the approximately $14,500 limit, the reduction is then given back to you in the form of higher benefits.
                • Re: Social Security
                  Renee
                  How so? If I have to give back $1 for every $2 I make, how do the increased benefits occur?
                    • Re: Social Security
                      herbyreed
                      Renee said...
                      How so? If I have to give back $1 for every $2 I make, how do the increased benefits occur?
                      I think the increased benefits will only happen if you are paying social security on the current income.  The increased benefits result from the income earned being added into your 35 year average.  For most people this makes a difference as there are some very low income years and zero income years being averaged in.
                       
                      Again, it is important to do the calculations based on your own situation and consult with someone familiar with SS rules it there is doubt regarding the best course of action.  Particularly in the case where there are two spouses both eligible for SS there are several options for maximizing SS benefits.
                • Re: Social Security
                  LeslieHo
                  Because you have over 30 years of paying into Social Security you will not be affected by the dreaded "Windfall Elimination Provision" that reduces the benefit for many.  I believe they take your highest 35 years, so you'll have a couple of $0 years pulling down your final benefit a bit, but I bet the effect will be minimal.  The benefit of waiting till 70 is very clear.
                  • Re: Social Security
                    chrlsrchrdsn
                    You understand that Social Security is an annuity that ends on your death.  This means that if you die at 69 you don't get penny one.  Further, lots of people are saying that everyone should wait until 70 to retire.  If you have assets beyond SS then saving those assets and collecting interest on them shows us an interesting set of lines.  First, if you collect at  62 vs. 66.5, you don't use up your savings + interest until age 91.  That means that if you die before 86, your inheritors end up with the difference.  If you collect at 62 vs. 70, the crossover is closer to 85.8 years.  That's why choosing the type of annuity when you retire with TIAA is so important.  If you are in poor/medium health, then definitely you want a plan with survivorship.  If you are in great health and your parents lived into their late 80's+, go for the non-survivorship.  You really have to consider your health and longevity when you decide when you will collect SS and what type of annuities you purchase.  There is no one-size-fits-all solution.  If your advisor says something like, "oh, you definitely get the most if you wait until 70," without knowing these factors, fire them on the spot!!!  BTW, I am not in the financial area at all.  I am a computer consultant and software designer.
                      • Re: Social Security
                        herbyreed
                        chrlsrchrdsn said... 
                        You understand that Social Security is an annuity that ends on your death.  This means that if you die at 69 you don't get penny one....
                          
                        There is no one-size-fits-all solution.  If your advisor says something like, "oh, you definitely get the most if you wait until 70," without knowing these factors, fire them on the spot!!! 
                        If I am waiting until I am 70 to start collecting and I die at 69 I am not concerned about not getting a penny from SS -  a surviving spouse might be of course, so that should be calculated in, but see below.
                         
                        Your final point illustrates why "not collecting" is not the issue.  If I am waiting until I am 70 it is most likely because a) I am still working and don't need the SS. and/or b) I am in good health and expect to live a long time.  A further consideration is whether I can collect a spousal benefit while deferring on collecting my own benefit.  This  is allowed for one spouse (after FRA) and can significantly increase the amount of SS benefits collected by a couple, particularly if both spouses are entitled to near the maximum benefit.
                         
                        The extra SS will make a big difference  if I do live into my 80s and 90s (and if I don't - see above) and will make it more likely that I can afford to keep up payments on long term care insurance, which for most people, is a necessity, when I do finally retire. 
                         
                        We don't know when we will die so we have to play the percentages as well as consider the current financial situation and the potential future financial situation.  That is what  good financial counselors can do for you.