Help with understanding expected SS benefits

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
gowest
Posts: 127
Joined: Sun Nov 22, 2009 9:32 am

Help with understanding expected SS benefits

Post by gowest »

Hi everyone,

I am planning to retire in about 5 years (at age 53) and so I've been investigating SS benefits (using both ssa.gov and https://opensocialsecurity.com/). I would appreciate input on whether I'm understanding and calculating the expected SS benefits correctly.

Background info:

My spouse worked only a handful of years before becoming a stay at home mom, so she doesn't qualify for SS benefits (apart from a spousal benefit) because she doesn't have 40 credits.

I have been working full-time since September 1999. My income has exceeded the maximum taxable SS amount starting in the year 2000 and every year since then (and I expect that to continue until I retire). So if I retire in 2027, I will have maxed my SS tax in 28 years. For the other 7 years (to reach the 35 years that count toward SS), the ssa.gov website reports that I have qualifying income (in varying amounts) for 6 years, so I'd only have one "0" for purposes of SS. Given the bend points for SS, I see this as essentially a non-issue.

The ssa.gov website reports my SS benefit (if I delay to age 70) as $4,237/mo., and I understand that this is the "primary insurance amount" or "PIA." I've punched that figure and other pertinent info into the Open Social Security calculator, which leads to my questions ...

Questions:

(1) Using the Open Social Security calculator, it recommends that I begin taking SS when I turn 70 and that my spouse begin her spousal benefit at that same time. Does that seem correct? Since my spouse does not qualify for SS herself, I think it's correct, but I'm really not sure. (For example, is it even *possible* for her to take spousal benefits before I begin taking my SS? I don't think so, but I haven't been able to find a definitive answer.)

(2) The Open Social Security calculator indicates that my retirement benefit would be $63,047/yr., and my wife's spousal benefit would be $25,422/yr., for a total of $88,469/yr. Does that seem correct? That's more money than I was expecting.

I hope I've provided all of the pertinent info. I look forward to hearing everyone's thoughts! If there are questions, let me know and I'll respond. Thanks in advance!
Jack FFR1846
Posts: 18503
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Help with understanding expected SS benefits

Post by Jack FFR1846 »

If this is Piper's calculator, you can include the expected 20% drop that will occur in 2034. Neglecting this will give you payment information that is too optimistic.
Bogle: Smart Beta is stupid
BogleTaxPro
Posts: 650
Joined: Sat Apr 04, 2020 6:08 pm

Re: Help with understanding expected SS benefits

Post by BogleTaxPro »

gowest wrote: Thu Aug 18, 2022 10:14 am Hi everyone,

I am planning to retire in about 5 years (at age 53) and so I've been investigating SS benefits (using both ssa.gov and https://opensocialsecurity.com/). I would appreciate input on whether I'm understanding and calculating the expected SS benefits correctly.

Background info:

My spouse worked only a handful of years before becoming a stay at home mom, so she doesn't qualify for SS benefits (apart from a spousal benefit) because she doesn't have 40 credits.

I have been working full-time since September 1999. My income has exceeded the maximum taxable SS amount starting in the year 2000 and every year since then (and I expect that to continue until I retire). So if I retire in 2027, I will have maxed my SS tax in 28 years. For the other 7 years (to reach the 35 years that count toward SS), the ssa.gov website reports that I have qualifying income (in varying amounts) for 6 years, so I'd only have one "0" for purposes of SS. Given the bend points for SS, I see this as essentially a non-issue.

The ssa.gov website reports my SS benefit (if I delay to age 70) as $4,237/mo., and I understand that this is the "primary insurance amount" or "PIA." I've punched that figure and other pertinent info into the Open Social Security calculator, which leads to my questions ...

Questions:

(1) Using the Open Social Security calculator, it recommends that I begin taking SS when I turn 70 and that my spouse begin her spousal benefit at that same time. Does that seem correct? Since my spouse does not qualify for SS herself, I think it's correct, but I'm really not sure. (For example, is it even *possible* for her to take spousal benefits before I begin taking my SS? I don't think so, but I haven't been able to find a definitive answer.)

(2) The Open Social Security calculator indicates that my retirement benefit would be $63,047/yr., and my wife's spousal benefit would be $25,422/yr., for a total of $88,469/yr. Does that seem correct? That's more money than I was expecting.

I hope I've provided all of the pertinent info. I look forward to hearing everyone's thoughts! If there are questions, let me know and I'll respond. Thanks in advance!
Your PIA is not the benefit at age 70. The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
User avatar
Chip Munk
Posts: 881
Joined: Fri Feb 22, 2019 3:01 pm

Re: Help with understanding expected SS benefits

Post by Chip Munk »

BogleTaxPro wrote: Thu Aug 18, 2022 10:48 am
gowest wrote: Thu Aug 18, 2022 10:14 am Hi everyone,

I am planning to retire in about 5 years (at age 53) and so I've been investigating SS benefits (using both ssa.gov and https://opensocialsecurity.com/). I would appreciate input on whether I'm understanding and calculating the expected SS benefits correctly.

Background info:

My spouse worked only a handful of years before becoming a stay at home mom, so she doesn't qualify for SS benefits (apart from a spousal benefit) because she doesn't have 40 credits.

I have been working full-time since September 1999. My income has exceeded the maximum taxable SS amount starting in the year 2000 and every year since then (and I expect that to continue until I retire). So if I retire in 2027, I will have maxed my SS tax in 28 years. For the other 7 years (to reach the 35 years that count toward SS), the ssa.gov website reports that I have qualifying income (in varying amounts) for 6 years, so I'd only have one "0" for purposes of SS. Given the bend points for SS, I see this as essentially a non-issue.

The ssa.gov website reports my SS benefit (if I delay to age 70) as $4,237/mo., and I understand that this is the "primary insurance amount" or "PIA." I've punched that figure and other pertinent info into the Open Social Security calculator, which leads to my questions ...

Questions:

(1) Using the Open Social Security calculator, it recommends that I begin taking SS when I turn 70 and that my spouse begin her spousal benefit at that same time. Does that seem correct? Since my spouse does not qualify for SS herself, I think it's correct, but I'm really not sure. (For example, is it even *possible* for her to take spousal benefits before I begin taking my SS? I don't think so, but I haven't been able to find a definitive answer.)

(2) The Open Social Security calculator indicates that my retirement benefit would be $63,047/yr., and my wife's spousal benefit would be $25,422/yr., for a total of $88,469/yr. Does that seem correct? That's more money than I was expecting.

I hope I've provided all of the pertinent info. I look forward to hearing everyone's thoughts! If there are questions, let me know and I'll respond. Thanks in advance!
Your PIA is not the benefit at age 70. The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
+1
OP, if your estimated benefit at age 70 is $4,237 then your estimated PIA is 4,237 / 1.24 = 3,416.94 so call it 3,417. That is the number you should plug in to the open social security calculator.

When calculating the benefit at age 70, the calculator will multiply the number you enter by 1.24 to account for the 8% per year your benefit would increase by waiting until age 70 to collect.
Topic Author
gowest
Posts: 127
Joined: Sun Nov 22, 2009 9:32 am

Re: Help with understanding expected SS benefits

Post by gowest »

Chip Munk wrote: Thu Aug 18, 2022 11:01 am
BogleTaxPro wrote: Thu Aug 18, 2022 10:48 am
Your PIA is not the benefit at age 70. The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
+1
OP, if your estimated benefit at age 70 is $4,237 then your estimated PIA is 4,237 / 1.24 = 3,416.94 so call it 3,417. That is the number you should plug in to the open social security calculator.

When calculating the benefit at age 70, the calculator will multiply the number you enter by 1.24 to account for the 8% per year your benefit would increase by waiting until age 70 to collect.
Ah, I see. Thanks for these clarifications.

I re-ran the numbers. According to ssa.gov, my monthly benefit at full retirement age is $3,410. So using that amount as my PIA, the Open Social Security calculator says my annual retirement benefit will be $50,741/yr and my wife's spousal benefit will be $20,460/yr, for a total of $71,201/yr.

That's the amount it gives me regardless of whether I'm still working. If I don't tell it I'm still working, it gives me these amounts. And if I tell it I'm currently working and will continue to work until 2027 (and I enter my estimated monthly earnings during the coming years), it still gives me those exact same amounts. Shouldn't the amounts be higher in the latter scenario based on additional working years?
User avatar
David Jay
Posts: 14587
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help with understanding expected SS benefits

Post by David Jay »

gowest wrote: Thu Aug 18, 2022 12:06 pmThat's the amount it gives me regardless of whether I'm still working. If I don't tell it I'm still working, it gives me these amounts. And if I tell it I'm currently working and will continue to work until 2027 (and I enter my estimated monthly earnings during the coming years), it still gives me those exact same amounts. Shouldn't the amounts be higher in the latter scenario based on additional working years?
The "front page" of MySocialSecurity is a bit simplistic. There are only two choices: Assume you continue earning the same amount until start of benefits or put in another number in the "window" (i.e zero, if you were to retire today). Otherwise it will give the same answer.

The "quick-and-dirty" answer is to put in the zero and compare that number to the default number. You will see that the difference is quite small due to the bend points and your work history. Then interpolate between those two numbers, it should be relatively linear because you have cleared the second bend point.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
gowest
Posts: 127
Joined: Sun Nov 22, 2009 9:32 am

Re: Help with understanding expected SS benefits

Post by gowest »

David Jay wrote: Thu Aug 18, 2022 12:30 pm
gowest wrote: Thu Aug 18, 2022 12:06 pmThat's the amount it gives me regardless of whether I'm still working. If I don't tell it I'm still working, it gives me these amounts. And if I tell it I'm currently working and will continue to work until 2027 (and I enter my estimated monthly earnings during the coming years), it still gives me those exact same amounts. Shouldn't the amounts be higher in the latter scenario based on additional working years?
The "front page" of MySocialSecurity is a bit simplistic. There are only two choices: Assume you continue earning the same amount until start of benefits or put in another number in the "window" (i.e zero, if you were to retire today). Otherwise it will give the same answer.

The "quick-and-dirty" answer is to put in the zero and compare that number to the default number. You will see that the difference is quite small due to the bend points and your work history. Then interpolate between those two numbers, it should be relatively linear because you have cleared the second bend point.
Got it. (My SS numbers keep going down--ha!) If I make my "average future annual salary" $0, the PIA goes down to $2,776. I didn't notice that it had auto-populated this field with last year's salary.

For the "average future annual salary" field, is it using whatever amount I enter as my salary for this year (2022) and every year thereafter until age 67 (full retirement age)? Or is it for 2022 until some other time?

I want to do the interpolation (I think you're right to assume the benefit amount will be relatively linear) but to do that I need to understand what the calculator is doing with the "average future annual salary" field. The calculator is so simplistic that it makes things difficult!
delamer
Posts: 17461
Joined: Tue Feb 08, 2011 5:13 pm

Re: Help with understanding expected SS benefits

Post by delamer »

Your wife can’t file for her spousal benefit until you file for your benefit.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
User avatar
David Jay
Posts: 14587
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help with understanding expected SS benefits

Post by David Jay »

gowest wrote: Thu Aug 18, 2022 12:50 pmFor the "average future annual salary" field, is it using whatever amount I enter as my salary for this year (2022) and every year thereafter until age 67 (full retirement age)?
I believe it is for every year until the "retirement age" shown in the benefit, i.e. that amount until 62 for the 62 benefit, etc. The SS assumes naively that you will work until you claim. But it has been a while since I used it.

So your plan seems reasonable - use the age 67 number continuing your current salary and with zero. Then you can use those two numbers and ratio to your number based on the number of years you will continue to work.

Remember that wage inflation will affect the actual values anyway, so it's all a wild guess 10+ years out. Your actual primary benefit will be calculated the year you turn 60.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
gowest
Posts: 127
Joined: Sun Nov 22, 2009 9:32 am

Re: Help with understanding expected SS benefits

Post by gowest »

delamer wrote: Thu Aug 18, 2022 1:28 pm Your wife can’t file for her spousal benefit until you file for your benefit.
Thanks!
Topic Author
gowest
Posts: 127
Joined: Sun Nov 22, 2009 9:32 am

Re: Help with understanding expected SS benefits

Post by gowest »

David Jay wrote: Thu Aug 18, 2022 2:03 pm
gowest wrote: Thu Aug 18, 2022 12:50 pmFor the "average future annual salary" field, is it using whatever amount I enter as my salary for this year (2022) and every year thereafter until age 67 (full retirement age)?
I believe it is for every year until the "retirement age" shown in the benefit, i.e. that amount until 62 for the 62 benefit, etc. The SS assumes naively that you will work until you claim. But it has been a while since I used it.

So your plan seems reasonable - use the age 67 number continuing your current salary and with zero. Then you can use those two numbers and ratio to your number based on the number of years you will continue to work.

Remember that wage inflation will affect the actual values anyway, so it's all a wild guess 10+ years out. Your actual primary benefit will be calculated the year you turn 60.
All very helpful. I appreciate it. And yes, I appreciate that this is mostly a wild guess since it's quite a ways into the future. I'm just trying to get a solid understanding of the "actual" values I can expect under the current framework, and then I'm making conservative estimates stemmed from that.
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Help with understanding expected SS benefits

Post by tj »

gowest wrote: Thu Aug 18, 2022 12:06 pm
Chip Munk wrote: Thu Aug 18, 2022 11:01 am
BogleTaxPro wrote: Thu Aug 18, 2022 10:48 am
Your PIA is not the benefit at age 70. The "primary insurance amount" (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
+1
OP, if your estimated benefit at age 70 is $4,237 then your estimated PIA is 4,237 / 1.24 = 3,416.94 so call it 3,417. That is the number you should plug in to the open social security calculator.

When calculating the benefit at age 70, the calculator will multiply the number you enter by 1.24 to account for the 8% per year your benefit would increase by waiting until age 70 to collect.
Ah, I see. Thanks for these clarifications.

I re-ran the numbers. According to ssa.gov, my monthly benefit at full retirement age is $3,410. So using that amount as my PIA, the Open Social Security calculator says my annual retirement benefit will be $50,741/yr and my wife's spousal benefit will be $20,460/yr, for a total of $71,201/yr.

That's the amount it gives me regardless of whether I'm still working. If I don't tell it I'm still working, it gives me these amounts. And if I tell it I'm currently working and will continue to work until 2027 (and I enter my estimated monthly earnings during the coming years), it still gives me those exact same amounts. Shouldn't the amounts be higher in the latter scenario based on additional working years?
plug your actual and projected future earned income numbers into ssa.tools to see what your PIA will be. The number on the ssa.gov statement assumes that you continue to work.
Post Reply