Joined May 2004
L6: Expert
Forum Thread
Should I go back to work? How does SS work?
June 15, 2024 at
12:42 AM
Thread Details
Hi...
I "retired" aka "stopped working" in 2020. But recently learned that Social Security uses your top 30 income years to calculate payments? I only have 27 years of work history.
Not sure what the actual calculation is... Do those three years make a huge difference? Enough for me to actually go back to work for 3 years? If it matters, I am 54.
Most importantly, I don't NEED 30 years to qualify, right? Its just that if people have more than 30, only the top 30 count, correct? Its NOT that if you have less than 30, you get nothing? If the latter, then obviously I need to get a job asap LOL
I did have a few years from JHS and HS where I worked summers/winter breaks and paid into SS. Is that enough? I made like $5 an hour back then, so while its not zero, its pretty close, lol.
Is there a resource I should look to for more info?
Thanks in advance!!
I "retired" aka "stopped working" in 2020. But recently learned that Social Security uses your top 30 income years to calculate payments? I only have 27 years of work history.
Not sure what the actual calculation is... Do those three years make a huge difference? Enough for me to actually go back to work for 3 years? If it matters, I am 54.
Most importantly, I don't NEED 30 years to qualify, right? Its just that if people have more than 30, only the top 30 count, correct? Its NOT that if you have less than 30, you get nothing? If the latter, then obviously I need to get a job asap LOL
I did have a few years from JHS and HS where I worked summers/winter breaks and paid into SS. Is that enough? I made like $5 an hour back then, so while its not zero, its pretty close, lol.
Is there a resource I should look to for more info?
Thanks in advance!!
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As to whether it makes sense to continue working, you should talk to your accountant as that would largely depend on how much you could realistically make and how much that likely increases your benefit and affects your tax situation in retirement (to say nothing about any health benefit you get\might lose since you are only 54).
Also, overall health and when you plan to start taking it come into play. In all likelihood imo (and again I am no accountant or tax professional), barring making a decent amount of money, it is likely not going to change the big picture too much if you are comfortable now. And you should factor in your overall enjoyment of life as opposed to working some crummy job for a bunch of morons like most people and all the stress that comes from that.
My 2 cents.
Without knowing his investment and other income,retirement savings, etc., you can not make an assumption the OP is going to live on little going forward. The fact that he retired and is not actively looking for work logically would indicate someone who has enough means to survive. Of course not everyone is logical and not everyone has a plan. Nor can you judge how much it will effect his SS benefit being 8 years short as that is a function of his earnings throughout his lifetime and obviously can vary greatly from someone who makes near min wages to someone who hit the max cap each year. Obviously working a few more years will increase the benefit some, but how much and what the after tax amount would be is a question for his accountant and tax professional. And medical insurance and any potential subsidy (either through work or through Obamacare) factor in as well.
I "retired" aka "stopped working" in 2020. But recently learned that Social Security uses your top 30 income years to calculate payments? I only have 27 years of work history.
Not sure what the actual calculation is... Do those three years make a huge difference? Enough for me to actually go back to work for 3 years? If it matters, I am 54.
Most importantly, I don't NEED 30 years to qualify, right? Its just that if people have more than 30, only the top 30 count, correct? Its NOT that if you have less than 30, you get nothing? If the latter, then obviously I need to get a job asap LOL
I did have a few years from JHS and HS where I worked summers/winter breaks and paid into SS. Is that enough? I made like $5 an hour back then, so while its not zero, its pretty close, lol.
Is there a resource I should look to for more info?
Thanks in advance!!
Your comment suggests that you were born in 1970. This makes your full retirement age 70. You can claim benefits at age 62 but you'll only receive 70% of the value. So you CAN begin to draw in eight years assuming you met other requirements such as 40 quarters of contributions.
Given that you stopped work four years ago, it appears you have some other source of income, assets that you have sold, etc. or that you have incredibly low costs of living. The first thing to consider is whether these will continue for at least the next eight years. Additionally, will they last for thirty more? Most mortality tables would show you living to around 83-84. Know that healthcare costs are highest in a person's last years. My mother's nursing home expenses are $11k per month and that's in a small rural town. Yeah, you may not plan to die like that. Most people don't, which is why they often run out of money. Just saying.
So the real SS key for you isn't necessarily WHEN but rather HOW MUCH. I suggest setting up an account in the SSA system. It'll provide a real time snapshot of your benefits. Be sure to use it to review their records of when and how much has been contributed to your retirement. You mentioned working in junior high and high school. Those only mean something if payroll taxes were assessed. Your work history record in the SSA system should show this. You can model what your future SSA benefits will be based on not working as well as alternatives like continuing to work and contributing. Only you can tell whether your lifestyle can be sustained on those benefits.
Unfortunately a great many people think that SSI is their retirement plan. It was never set up that way. It's supposed to supplement other income, not be the principal source.
Another thing to consider is taxation. Lots of pre-retirees do not know that up to 85% of their SSI benefits are taxable at the federal level. So plan accordingly.
In addition, in another 11 years you may be going into Medicare. For most folks, the monthly premiums for Medicare are automatically deducted from your SS benefit. So a theoretical $1,500 SSI check may sound good now but taxes and Medicare costs eat into it. So will inflation. Yes, SSI is indexed to inflation but this year my Medicare premiums went up by almost twice the rate of my social security benefits. That with the same exact medical plan.
Others have told you about the missing years being included at zero so I won't repeat that. Just remember that most people's incomes increase over time and are often the highest of their lives when they actually retire. So a decent income today that wipes out a zero one in 2020 or junior high will make the calculated benefit higher. It's just math. A side benefit to working longer is that the job may have healthcare benefits which could save you money now and possibly in the future. Might get a pension or have an existing one increase a bit.
The little info that you provided doesn't mention family or dependents. An early application for SS with less-than-normal contributions could leave them in a bind if you die. Also, if you are married and each of you are or plan to receive SSI, you really need an expert to make the right choices. Usually, there is a net reduction of overall income upon a death. The SSA looks at the benefits of each and makes adjustments. If you die, for example, your benefit ceases immediately. But if your benefit is higher than your spouse, theirs might be increased. You need an expert. Also important if there is a spouse, especially younger one, and a decision is to made as to which of you should claim SS first.
Now, obviously all of this may be moot if you're already rich or have a fatal illness.
One last consideration is that our wonderful US Congress has an atrocious record of dealing with the SS shortfall even though the experts have issued countless reports on the subject. Without Congressional intervention, the SSA will not have sufficient funding to pay benefits at the calculated levels soon. They'll only be able to pay 77% of the benefit. This is largely due to demographics. Baby boomers funded the system for years but they're retiring a lot and using some of the funds so it's a bit of a double whammy. Almost certainly the solution is some combination of higher contributions and less benefits but it's rare for a politician to say or support this.
Absent rich or fatality, I'd recommend going back to work. My parents and grandparents learned the hard way that they were not financially prepared for retirement. All had to go back to work and the jobs they obtained paid nothing like what they made before retiring. Two had to work into their mid eighties for economic reasons. Not fun or boredom. Your note mentions three years (presumably between 2020 and now) but I think you should look at it as either twelve or thirty. You left the workforce twelve years before the very earliest that you can claim benefits on yourself and that will have an impact for a projected thirty years before you are expected to die.
I do commend you for asking for advice. Until just before I retired, I knew almost nothing about how SS and Medicare worked. These are complicated things and while there are resources available, it's Greek to many. You'll have well-intentioned people offering suggestions based on their experiences (like me!) but everyone's situation is different.
I "retired" aka "stopped working" in 2020. But recently learned that Social Security uses your top 30 income years to calculate payments? I only have 27 years of work history.
Not sure what the actual calculation is... Do those three years make a huge difference? Enough for me to actually go back to work for 3 years? If it matters, I am 54.
Most importantly, I don't NEED 30 years to qualify, right? Its just that if people have more than 30, only the top 30 count, correct? Its NOT that if you have less than 30, you get nothing? If the latter, then obviously I need to get a job asap LOL
I did have a few years from JHS and HS where I worked summers/winter breaks and paid into SS. Is that enough? I made like $5 an hour back then, so while its not zero, its pretty close, lol.
Is there a resource I should look to for more info?
Thanks in advance!!
Info from the horse's mouth is far better than opinions from anonymous internet users. Just my humble opinion as an anonymous internet user.
I just want to correct something to prevent possible confusion. You are referring to SSD, not SSI. SSD is based on work history. SSI is means based. A child can get SSI if he/she is disabled.
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Unfortunately a great many people think that SSI is their retirement plan. It was never set up that way. It's supposed to supplement other income, not be the principal source.
Yes, it is possible for a person can receive $4,800 in SS benefits. To some, this sounds incongruent with a maximum SS benefit at full retirement of $3,888. First, to even get the $3,888 you must have contributed the maximum and for your entire contribution time span. Most people don't experience that, especially in the earlier years of their careers. Secondly, to go beyond the $3,888 and instead receive $4,800, you must have deferred applying for SS until about age 70. For many, this is a wise move financially but in reality, only about 8% of folks actually do this. The average SS benefit is just over $1,700. I suspect but have no data to prove that many SD fans are financially savvy and receive more than that.
Then there's Thailand. Ironically, I just had a cousin visit last month. He's lived in 33 countries and has lived in Thailand for about the last ten years. Absolutely loves it. But he's also an outlier, statistically speaking. Wikipedia reports that in 2010, about 4% of its residents were from foreign countries. And less than 2% of that 4% are from the U.S. Yep, six hundredths of one percent overall. That doesn't diminish the allure of Thailand. In fact, my cousin's wife is from that region. Both she and their college-bound daughter admitted that most people living there had servants to do virtually everything for them. They were a bit ashamed of this dependence. The daughter's school even required a senior class for the kids to prepare them for a world outside such culture. They were taught how to shop for food/goods (avoiding scams), how to cook, wash their own clothes, and other things that a modern adult without any servants would do every day.
So, you are telling the truth but for just an incredibly tiny segment of people.
BTW, the daughter will attend college in Switzerland because it's much cheaper than most places. $20K per year vs a multiple of that in the U.S. and many other countries.
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