Posted: 4/20/2026 11:26:32 AM EDT
[Last Edit: Morgan321][Edited]
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With the early retirement talk I figured this might help somebody. The math is simple, but figuring it out by reading the SS website takes a bit of time. Hopefully this will help somebody: You get the occasional letter in the mail or see on the SS website an estimate SS retirement payment that says "this estimate assumes you continue to earn $X per year until you start your benefits." where $X is your reported SS earnings for last year. But what if you retire significantly early? How much will SS pay if you retire 5-10-15-20 years before claiming your SS retirement? You can calculate your SS retirement yourself so that you can make better decisions about retiring. Go to the SS website and download your earnings history. It will be a dollar amount for every year you paid SS taxes. Go to the SS website and download the indexing factors. This is the way inflation is factored into SS. It is based on the year you turn 67. If you're not 67 yet the factors for future years will change slightly based on actual inflation, but the impact is small. Make a spreadsheet that multiplies your earnings for each year by the indexing factor for that year, this is your "indexed income". Sum the highest 35 years of indexed income together and divide that figure by 420 (months in 35 years), this is your "average indexed monthly earnings" (AIME). The AIME is used like a tax bracket to calculate your SS retirement benefit. For 2026, the "brackets" are 90% up to $1286, 32% up to 7749, and 15% above 7749. Those dollar amounts change each year based on inflation (or if congress changes SS law). So if your AIME is $5,000 then your "primary insured amount" (PIA) is 0.9*1286+0.32*(7749-1286), or $3225. The "PIA" is the amount you would get if you claim SS at your full retirement age (67 for almost everybody). If you claim at 62 you get 70% of your PIA. If you claim at 70 you get 124% of your PIA. Takeaways: - The progressive math of SS retirement is easy to see. It's a huge benefit for poor people and becomes less significant the higher your income is. - The age to start SS is a great debate. That decision is easier if you know that SS retirement is based on SS life expectancies - if you live longer than average you are better off to claim later. If you die before your SS life expectancy age then you are better off starting SS earlier. There is no way to game the system unless you know when you will die. - Yes SS taxes are below payout. Congress will kick the can until the last minute and then they will change the law to balance the books. Nobody knows how they will, but SS won't go away because that would start civil war 2.0. Here is how my spreadsheet looks. Note the index factor decreasing with age. You can't see it, but 2026 is my 34th year of SS earnings, so in 2026 and 2027 I am replacing those $0 income years of 1995 and 1996. But I'm in the 15% "bracket" - added SS earnings don't change my benefit by very much. If I work all of 2026 and 2027 my SS at 67 years old will increase by only $140 per month. So, for my situation, SS is not a factor in choosing a retirement date.  Note that cumulative SS retirement income meet around 77 (approximate SS life expectancy for Gen X aged people). The relationship between how long you live and when you start SS is obvious. Be objective about your health once you're in the SS window to make the best decision for you. 
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Once you do this, you also need to do it every year. The indexing is "projected", as is the bend points. After 60, your indexing is 1/1, so that doesn't matter, but your bend points do change up until the year you turn 62. The good news is that if you run this formula, and are ok with the results, the changes to bends points alone from say 55 to 62 should only work in your favor to increase your benefit. In 2017, the first bend point was $895 and now it's $1286. The second bend point was $5336 and now $7749. That is a decent change in 10 years. |
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Originally Posted By Joe_Blacke: Once you do this, you also need to do it every year. The indexing is "projected", as is the bend points. The future index factors all changed in the first or second decimal point and the bend points changed by a few dozen dollars. Net result was an increase of about $130 (about 3.7%) which is on par for a year's worth of inflation. The point was that the SS "estimate" is a dangerous number to use for early retirement planning since it assumes you will continue making your current salary until you claim SS. |
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That’s why I planned to get nothing from SS. I agree the politicians will have a fix in place eventually. No one is going to like it but it’ll have to be made. I’m guessing a combo of a tax increase, changing how SS is calculated to decrease benefits without appearing to do so, increasing the tax cap more than it normally does, and increasing the ages where you can claim SS. So basically what they did in 1983. No one will like any of it but the screaming will be louder if the program automatically drops to 70-80% of promised payout due to lack of funding. I imagine whichever party is holding the bag when the time comes to implement the fix….they will pay for it at the next election. In my case, my wife will file for SS at 62 and I’ll file for SS at 67. In our situation, that’s the best course of action. But, our situation is unique to us. Either way, we have planned to live without it so if we get anything at all from it, it’ll be a bonus. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By ColtRifle: That’s why I planned to get nothing from SS. I agree the politicians will have a fix in place eventually. No one is going to like it but it’ll have to be made. I’m guessing a combo of a tax increase, changing how SS is calculated to decrease benefits without appearing to do so, increasing the tax cap more than it normally does, and increasing the ages where you can claim SS. So basically what they did in 1983. No one will like any of it but the screaming will be louder if the program automatically drops to 70-80% of promised payout due to lack of funding. I imagine whichever party is holding the bag when the time comes to implement the fix….they will pay for it at the next election. In my case, my wife will file for SS at 62 and I’ll file for SS at 67. In our situation, that’s the best course of action. But, our situation is unique to us. Either way, we have planned to live without it so if we get anything at all from it, it’ll be a bonus. There are a couple easy fixes that would keep SS paying out like it has. The first is to up the taxable wage base. Right now no income over $184K is taxed. The .gov is missing 12.4% of all income over that which is huge. That alone would add decades to social security. They project this change alone would keep SS solvent past 2060. Congress knows all this, and the earlier they implement the longer the benefit would be. But Congress is Congress so they won’t do anything until there is a crisis. |
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I’m in the camp of don’t plan for social security at all and if you get anything just count it as a bonus. This is probably even more critical for people planning to retire early. We’re about 6 years away from the trust fund going broke which unless it gets shored up means significant cuts. Means testing will likely be introduced and throw a monkey wrench into everyone’s plans that counted it supplementing their investment income. |
| The Social Security part is largely not a factor for those with enough assets to retire 15 years early. If it is a crucial part of the plan, they shouldn't be retiring early. The real issue for most is healtcare. Medicare starts at 65, so if they are going to pay out of pocket for insurance, that's $25k in current dollars for 15 years. |
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You can just put your info into Ai and it will calculate this for you. My estimated payment at age 62 (assuming I will work until age 62) is $2850. My estimated payment at age 62 (assuming I stop working at age 55) is $2650. Working for 7 additional years is NOT worth $200 a month in benefits. |
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Originally Posted By ColtRifle: That’s why I planned to get nothing from SS. I agree the politicians will have a fix in place eventually. No one is going to like it but it’ll have to be made. I’m guessing a combo of a tax increase, changing how SS is calculated to decrease benefits without appearing to do so, increasing the tax cap more than it normally does, and increasing the ages where you can claim SS. So basically what they did in 1983. No one will like any of it but the screaming will be louder if the program automatically drops to 70-80% of promised payout due to lack of funding. I imagine whichever party is holding the bag when the time comes to implement the fix….they will pay for it at the next election. In my case, my wife will file for SS at 62 and I’ll file for SS at 67. In our situation, that’s the best course of action. But, our situation is unique to us. Either way, we have planned to live without it so if we get anything at all from it, it’ll be a bonus. Wife and are planning similar ages to take. Our thoughts to, it is a bonus if there. We planned on it not being there. |
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Yeah doing the math is useful. Figured out years ago that going back to work just to help boost my SS payout was a fools errand. (Bend points….). This was after retiring at 50 with a couple of my 35 counted years being zeros….just not really worth it to fill in those years. And yep- SS is set up to mainly benefit those who earn the least amount and contributed the least. Just like every other socialist idea (including my pension plan- higher earners get screwed on COLAs, lower earners get full COLA’s though, because somehow they deserve it?) I never counted on SS either, but if it is not reduced, when we hit age 67 our combined payout will be 69k/year. A nice chunk of extra money. Still wish I just had every dollar back that I paid in, but that realistically will never happen, nor is gutting the system likely either. Just like most entitlements- hard to get rid of once it is started, so it is best to not start them…. |
a loaded gun won’t set you free, so you say…
Moderate-Length Barrel Evangelist
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Your results will be different due to your income stream. But this is what I figured out based on the Social Security website. Each year I delayed, I picked up for that year $200 dollars. So delay one year, get additional $200 per month. If I delayed 5 years, I would get $1k per month more money. I plan to work; so the amount of money I would make would cause Social Security payment to drop to zero until I hit full Social Security retirement age then I would get 100%. If I read it right, if my income was 40k, and I would have received 20k if I retired. My Social security would drop to zero. If I was older or equal to full retirement, I could earn 40k, receive my 20k and net 60 k. Once you max out the minimum number of credits; each new credit will be assess on if it is more than you made in the past. If it was; the credit for this year would be kept and the old credit would drop off. This would result in some increase in the benefits that you would receive. I could be wrong in my thinking, but that seems to be what a few others I talked to at work thought how the system worked. |
The last thing a tyrant wants is their ideas to be judged on the battle field of truth and justice.
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Originally Posted By bradbn4: I plan to work; so the amount of money I would make would cause Social Security payment to drop to zero until I hit full Social Security retirement age then I would get 100%. If I read it right, if my income was 40k, and I would have received 20k if I retired. My Social security would drop to zero. If I was older or equal to full retirement, I could earn 40k, receive my 20k and net 60 k. Taking SS while still working before you turn 67 is financial suicide unless you expect to die very early or are extremely poor and need the income to survive. |
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"Go to the SS website and download your earnings history. It will be a dollar amount for every year you paid SS taxes. Go to the SS website and download the indexing factors. This is the way inflation is factored into SS. It is based on the year you turn 67. If you're not 67 yet the factors for future years will change slightly based on actual inflation, but the impact is small. " You might verify, but I'm pretty sure the indexing factors used for the benefit calculation are the year when you are first eligible for Social Security: https://www.ssa.gov/oact/cola/awifactors.html#:~:text=An%20individual's%20earnings%20are%20always,the%20year%20of%20first%20eligibility. (Refer to 3rd paragraph) So for most people it's based on the year you turn 62 years old. After that, even if you haven't begun taking your benefits, they apply an inflation rate equal to the yearly COLA. As you found out, if you already have 35 years, working additional years may not really increase your benefit much if your income is in the 15% bend point range. That is unless you get a significantly increased income for those last few years. All you're really doing is trading one of your 35 years for another year. So you may essentially be paying 6.2% of your wage for that year into SSA even though it might not be used in your benefit calculation anyways. And in the last couple of years they don't apply indexing factors. |
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Originally Posted By Morgan321: Why would you start SS before 67 if you are still working? Taking SS while still working before you turn 67 is financial suicide unless you expect to die very early or are extremely poor and need the income to survive. That was the point I was trying to make. One size does not fit all cases, and depending how much you make you could end up with less than a net zero on collecting social security. How is that? You are collecting SS, and end up not getting money from them. While still working and paying into SS with zero benefits to include 'time in grade'. The big unknown for me; if I start cashing out my 401k prior to 67 while collecting SS; does that count for income and would some/all of my Social Security? |
The last thing a tyrant wants is their ideas to be judged on the battle field of truth and justice.
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Originally Posted By bradbn4: That was the point I was trying to make. One size does not fit all cases, and depending how much you make you could end up with less than a net zero on collecting social security. How is that? You are collecting SS, and end up not getting money from them. While still working and paying into SS with zero benefits to include 'time in grade'. The big unknown for me; if I start cashing out my 401k prior to 67 while collecting SS; does that count for income and would some/all of my Social Security? No. Earned income will affect your SS. Taking distributions from your 401k, while taxed, is not earned income. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By bradbn4: You are collecting SS, and end up not getting money from them. While still working and paying into SS with zero benefits to include 'time in grade'. The big unknown for me; if I start cashing out my 401k prior to 67 while collecting SS; does that count for income and would some/all of my Social Security? Once you hit full retirement age your benefit is not reduced if you are still working. Again, unless you need the income or believe you will die before your early 70s it is insane to claim SS early. Claiming early also impacts survivor benefits if you are married, this could be a huge deal if your spouse has significantly less SS credit than you do. Pretty sure that income that is taxed for SS is what matters for SS reductions - ie. w2 or self employment income. Pensions, retirement account distributions, capital gains, interest, etc. do not count based on my understanding. I believe that income that is subject to income tax but not SS tax (ie. 401k distributions) does count for determining what fraction of your SS is taxable, but that limit is very low and almost everybody who isn't destitute hits it. |