:>). Social Security is going to change a little bit in 2021, 90% of your AIME up to a first "bend point", 32% of AIME between the first and second "bend point", 15% of your AIME above the second bend point, Bend points are income thresholds. I love this calculator and the explanation. Oh good grief on the transition from welfare to disability! • Haiti For every dollar contributed up to an AIME of $960, you’ll get 90 cents per month when you take Social Security at full retirement age (67 for those of us born after 1959). To be fair to the government, though, you only pay taxes on your first $118,500 in income for 2016 ($127,200 for 2017). Congrats on reaching the second bend point — and my condolences for the fact that your contributions now mean very little. To use this chart, first find the section for the applicable eligibility year. You then have to multiply every single year by the Index Factor in order to get every year’s Indexed Earning. Calculating the “crossover” point to decide whether to claim benefits at 62 or 70 (or whenever) is not necessarily a simple spreadsheet. https://earlyretirementnow.com/2017/01/25/the-ultimate-guide-to-safe-withdrawal-rates-part-7-toolbox/. The following page provides information for this location like the office phone number, hours of operation and driving directions. Note that these don’t all necessarily have to be completed prior to pulling the FIRE trigger. Thanks, I’ve run calculators and run calculators on this. I know it’s theoretically possible and even probable, like the Vikings winning a Super Bowl someday, but I’ll believe it when I see it. I THINK the correct answer is $48,642-the Average Wage Index-that is reportd at SS. Understand the SSA Bend Points, estimate your future benefit & optimize your contributions! Again, the video above gives information on how to do this. I am pretty sure I am beyond the second bend. Earning beyond the first bend point doesn’t do nearly as much for you, but you still get 32 cents for every dollar of AIME between the first bend point and the second at $5,785. I will ABSOLUTELY, no questions asked, take my benefits early for the simple reason that I don’t need them. Also, the credit from prior years’ work becomes more valuable as the index factors for all past years are increased. Benefits are based on my current SS benefits (yay, past the second bend point!). Top 5 Mistakes Doctors Make With Disability Insurance, Love Your Job? The smallest amount of time you can earn your credits is 8 years and 2 months – you are limited to 4 credits a year, but you can earn all 4 credits in a single month. You are quite young, so likely you don’t have more than maybe 10-20 work history years now. “Non-Citizens Who Leave the United States, When some non-citizens leave the United States for six months or more, their benefits stop. To keep it simple lets say its a part time job of some sort that results in some W-2 earnings. You’re right — the US government has some wacky definitions. 5 Ways to Be Ready, Copyright, Trademark and Patent Information. Let us know below! Select Multifamily, Student, and Senior Living Investments, Earn easy 1099 income with quick surveys for healthcare professionals with InCrowd. The bend points will increase annually with inflation, as will your AIME as older earnings will be worth more as time goes on. At $62261, that requires employer and employee FICA contributions of $7220.36 plus medicare taxes. Interesting what it takes to get us to overcome the inertia of standing still. I don’t necessarily forget it, but I don’t think about it much. If we exceed the family maximum, that might be a reason to claim earlier than 70. If, as an early retiree with sufficient assets to not need SS, doesn’t it make more sense to take the earliest distribution? It is a factor to consider. In theory a few years of at least $5,397 would help replace some zeros. Social Security Benefit Formula Bend Points Metadata Updated: November 10, 2020 A table illustrating the dollar amounts in the Primary Insurance … Additional earnings give you vastly diminished returns at this level of AIME. Note that the results are your projected benefit in today’s dollars. In order to earn the maximum four Social Security credits during 2020, an employee would have to earn $5,640 in Social Security … Good discussion PoF. TN 71 (11-19) RS 00605.945 Indexing Factors for 2020 Eligibility Use the chart in this section to manually index earnings of any wage earner who is initially eligible in the year 2020. Excel is hard. Am I wrong? Nice post. If your AIME is exactly $960, you will qualify for a monthly benefit of $864 at your full retirement age. Market data powered by FactSet and Web Financial Group. Social Security 2100 Act Would increase first bend point multiplier from.90 to.93 Would base cost-of-living adjustments on the CPI-E (expected to increase COLA by 0.2 percentage points per year) Would increase the special minimum PIA Thanks for breaking this down. With significant part of my earnings history outside US, I knew I wouldn’t reach the second bend point. How Much Money Does a Doctor Need to Retire? For the vast majority of docs, they will be well past the second bend point by the end of their career. The second? "Benefit Formula Bend Points." (If you get to 132% and take a 25% haircut you will be at 99% of your FRA! If you think the government wouldn’t punish people who relied on current policy to make plans think again: Obama raised taxes retroactively but kindly provided 5 years for me to pay the extra 30k. Obviously, the SSA has never had to clean up after me or my kids. • Fiji This is a site for aspiring early retirees, but you do make a good point about taking SS early versus padding the earnings record in your sixties. Given that most people won’t have much saved up for retirement (personally saved up). Videos you watch may be added to the TV's watch history and influence TV recommendations. You then need to calculate your Primary Insurance Amount or PIA based on calculations of these Bend Points. • Ethiopia Thank you for doing it. I’m glad the post helped you navigate a complex situation, and I’m sorry to hear of your husband’s diagnosis. Your Social Security benefits equal 90% of your AIME up to the first bend point, 32% between points one and two, and 15% above the second bend point. That works out to be about 40% of my age 70 benefit. If a spouse is going to take the 50% spousal benefit (not your case), it can become even trickier. Trying to get any incremental earnings past the 2nd bend point is essentially low yield when it comes to maximizing SS benefits especially considering the go to not work a w-2 job because I need to. I have enough “golden handcuffs” angst with my job. However, social security is indexed for inflation so the break-even period is likely pretty close to this number. I’m pretty sure my wife will be collecting half of my benefit unless something changes that we don’t anticipate. I really like the calculators. COLA for the 6 years that I had delayed my claim was applied to the PIA. Know your bend points! Yeap, I look at it as icing on the cake too. The ", Cumulative Growth of a $10,000 Investment in Stock Advisor, Here's How the Social Security Benefit Calculation Is Changing Next Year @themotleyfool #stocks, smaller percentage of their total income replaced, This Vanguard Fund Is the Bitcoin of ETFs, Why Early Retirees Shouldn't Worry Too Much About the Stock Market, Got $1,000 to Invest? Thanks! The break-even point for waiting is somewhere in the early to late eighties, depending on the assumptions of returns on the money. On average, Social Security replaces about 40% of the average workers pre-retirement income. I was messing with Big ERN’s retirement google sheet. • Malaysia Your assumption though is that you can invest at 8%. Same here. I don’t know about you, but my travel(and almost surely overall) expenses will be much lower at 85 than 65. Client is 51 and is currently reporting less than that but could probably adjust that higher. Hope this helps. Thank you for the post and Excel spreadsheet. Accessed Nov. 16, 2020. This is all quite interesting. Bet you didn’t expect to see that type of comment in a SS post! I qualified for SS in 8 years and 4 months (I haven’t even been in this country for a decade yet!). Thanks POF for the clear explanation and calculator. Investing the benefits pushes the break-even point out much further but, of course, is contingent upon returns. However, the program is designed to replace more of the income of a … Thoughts? I did notice a couple of typos in the Social Security tab of the calculator spreadsheet: Cell E75 is: =IF(E69>5536,E69-5536,0) Social Security is something we aspiring retirees don’t spend much time talking about. These are my numbers. If he is in relatively poor health, it would make sense for her to take benefits sooner than later. Passionate advocate of smart money moves to achieve financial success. Enter your earnings data from ssa.gov into the Social Security Calculator to learn whether or not you’ve passed the first and second bend points and what your expected benefit would be if you retired today. At that time (using the CPI Inflation calculator in reverse), the first bend point would be 1872 and the second bend point would be 3785. The last time I looked, I was pretty close to the second bend point, but not quite there yet. Will we each receive our full benefit, or is there some sort of “family maximum” to be aware of? Subscribe to download the spreadsheet used in this post and a whole bunch of other calculators to help you in your journey to financial freedom. About 60% of that increase was due to replacing a $0 contribution year with a max contribution year, and the other approximately 40% was from the increasing index factors as applied to past contributions. It really helps to illustrate that working way past the 2nd bend point should not be for SS purposes. I don’t anticipate taking a penny from it in the first 25 years of FIRE, so it feels pretty abstract. Lynne – If you don’t yet have 35 years of work history, would you say its recommended to at a minimum get a little bit of W-2 income once you are FIRE just to reach the 2nd bend point, thus eliminating a few zeros from your calculation? After that, the additional benefit from increasing AIME is less than half what it was prior to the 2nd bend. I’m away from home and using Excel Online to make edits — unfortunately, it’s not as robust as the full program and a number of formulas were left out and only the values transferred over. Data source: Social Security Administration. My AIME increased by nearly $500 since I calculated it in 2019. I’m a few years shy, but if I keep this website going into 2022, we should get there. The Social Security and Medicare Boards of Trustees put out a report in 2017 saying the following: You're signed out. FYI, your updated numbers for bend points are not consistent throughout the article. The impact of bend points. Program Operations Manual System (POMS) Effective Dates: 11/01/2019 - Present Previous | Next. Some government employees participate in an alternative pension system, but do not contribute to Social Security. Cell E75 should be: =IF(E69>5336,E69-5336,0). The initial rate of rise in your expected benefit is quite steep until your contributions reach the first bend point (represented by my proximal interphalangeal joint). bend points will increase annually with inflation, if I happen to leave this world before her. According to this article from Time, 80.5 is the break-even point. My husband will be 59 this year, so we’re getting closer to SS being a decision we’ll have to make. There are other advantages to postponing till 70. • Pakistan • Cameroon Thanks for the great calculator. 2. by cleaning a lot out of my tIRA, my RMD plus SS at 70 will be below 114K per year, (hopefully just below). Jul 24, 2020 - Social Security benefits will be reduced for the early retiree. My AIME is $6965, well past the second bend on the curve, with 35 plus years of earning. • Tunisia • Botswana Nice write up PoF. A few more $8,700 jumps and the funding issue is solved. Well played, PoF . Please poke holes in my math … but seems like you come ahead by $4.4 M in total lifetime benefits starting at 62 instead of 70 living to 85. • Nepal If I was taking SS it would dramatically reduce my conversion at the 15% level. In my case I pulled de-risked a big amount (several hundred K) to Roth convert so I am doing this exact thing pulling a lot now for a later payoff in tax savings starting at age 70. When I pull the plug, will be able to speak more about what my company and my teams specifically contributed to that endeavor. A higher SS+RMD yet under 15% (or 12%) means I have to take less out of the post tax account which improves its longevity. Once you’ve surpassed a bend point, you shouldn’t lose it, because your AIME will increase each year as the bend points grow larger. You may want to correct that. But, as you pointed out, working just for social security benefit is a poor investment. The money you’ve contributed over the years is used to calculate your Average Indexed Monthly Earnings (AIME). By paying the FICA tax, employees are earning Social Security credits. It’s worth thinking about that when deciding on when to retire. But I’m also not banking on it. Thanks PoF! If you’ve got a heart full of stents, type II diabetes, and oxygen dependent COPD, you should start collecting yesterday! • Malawi Worst case, we are fine. Every time I create a new calculator, I learn some new spreadsheet tricks. Returns as of 03/09/2021. I’m certainly not making this a primary part of my retirement, but why not play the game well now to maximize the benefit later. Any additional work years as a doc will replace very low earnings years of adolescence but probably will not move the needle all that much toward actual retirement benefit. I don’t see where it would hurt to get some income and it certainly would help to erase some zero years, which could substantially impact your benefit amount. Dan. Also I have a younger wife who is a SAHM and running my SS up to age 70 improves her take to 21K instead of 15K when I kick the bucket. Again because I don’t really think much about SS. Spread that $3.5 million out over 35 years, and you might pay a few hundred thousand, but certainly less than half of the high earner. And that's where the change comes in. Social Security Administration. Social Security Intelligence is not affiliated or connected with, or endorsed by, the Social Security Administration. You then take the entire Indexed Earnings and divide the total number by 420 (the number of months in 35 years, upon which your Social Security is determined). It came out to be between the ages of 76 and 77 based on actual COLA and wasn’t affected by what I used for future COLA. My wife has done a lot of hard work, but most of it has gone unrecognized by the Social Security Administration. For instance, the current Bend Points for 2020 are 960 and 5785. For most of us, Social Security is the closest thing to a pension we’ll see. 2020 Social Security Calculator. I was somewhat familiar with the Bend Point concept, but had never done the math for myself. The benefit to his eventual SS payout would be replacing a year where his index income was 62261. You can paste your earnings record from the SS website and tell it how many additional years you’ll work and it will calculate your Primary Insurance Amount as well as how much it’s changed for early or delayed initiation of benefits. If you failed to earn income for 10 years (40 three-month quarters of at least an inflation-adjusted $1,410 income (in 2020 dollars)), you’re not eligible. This now takes 429 months or 35.75 years. Note: If you were born after 1953, this may no longer be an option for you. To sock more $ away, maybe, but not for SS! There are some early retirees who should not plan on Social Security income. It’s easy throw away money when your making a lot in W2 land, less easy when that money is actually at risk. It’s absolutely an individual decision, and you should also factor in you and your partner’s health. Textbook contributor. ? That's because the bend points used to determine your benefits are those in effect during the year you turn 62. In particular, here's what's going to happen to it in 2021. The estimate of the future benefit assumes that the program remains unchanged between now and the time you start collecting. Maybe working longer or part-time work wouldn’t be so bad (sorry for the heretical remarks on a Fire website!) This assumes your next year working will replace a year of $0 earned and contributed. I’ve created a calculator that will tell you whether or not you’ve reached the first and second bend point and will estimate your monthly benefit if you were to stop contributing now. AIME of $5398 vs $5397. The SS website also has a “can I retire early” calculator where you can put in your actual income for each year and I “think” I recall it has ability for you to put in expected income in future years. 5. I had not given this much thought but recently my mother was debating whether to take SS early (she is 62). It’s an inflation-adjusted average of your monthly earnings over your most lucrative 35 years. What’s your plan for Social Security? Since I live on cash my tax bill is zero so I can convert to the upper limit of the present 15% bracket which is 75,900 per year AGI. The nice thing about this spreadsheet is that it shows just how little change one gets by continuing to work past the 2nd bend point, especially when you already have 35 years of work history and in spite of my early work years showing very low income. But again, I think we’ll have something. Since I’ve been tracking this for a few years now, I’ve noticed how that second bend point increases with inflation; it went up about $200 from 2019. Blowing off 15% is blowing off a larger percentage of SORR protection in old age and I consider age 70 SS as a premier SORR hedge. OK, I see. Create a spreadsheet with 5 columns (Year, Age at that specified year, Earnings, Indexed Factor and then Indexed Earnings) You then have to write down every single reported annual earning. My project as I get ready to set up the new year’s office payroll was to figure out if he should take W-2 wages going forward or not. • Morocco You’re in great shape, obviously. 2020: 960: 5,785: 1,226: 1,770: 2,309: 2021: 996: 6,002: 1,272: 1,837: 2,395: a Year of eligibility; that is, the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62. This probably would not affect someone close to receiving SS benefits, but certainly it would affect the retire early crowd. AIME above the first bend point up to the second bend point, $5,785 in 2020… What’s the significance of 420? However, non-qualifying spouses married to someone who qualifies for Social Security can receive half their spouse’s benefit if taken at full retirement age (FRA). My father in law uses his social security benefit as a donation fund. The problem I see is with the bend points changing with inflation. Couldn’t you just continue to earn $5,397 each year while being retired before collecting SS to satisfy that? Unless I die early, then the benefit will be very helpful for my family. I’ve never focused a whole lot on SS, which you point out is a fairly typical thing for people like us (FI/FIRE). Really appreciate your SS Bend point calculator. I looked into this a couple of years ago and realized I was pretty close to the second bend point. • Madagascar Thank you so much for the calculator and the clear explanation! Don't subscribe In your calculator I typed in $128,400 for 2018 and apparently I just hit the second bend point this month! Interesting. Collect own benefit from age 62 to 67, then switch to the higher spousal benefit.” Have you considered the 2015 changes that made some “double dipping” benefits unavailable to those of us born January 1954 and thereafter? Each year, I update this Social Security article, gauging my progress and potential future benefit as I approach the second bend point. • Lesotho Investigating what you end up with after taxes is what matters to help decide when it is best to start SS benefits. And that's where the change comes in. If he’s healthy for his age, this might be a job for a spreadsheet. I’m glad SS is so progressive that there is little benefit to working much beyond 10-15 years. It sounds like she’d be best off taking SS now if he has already taken his, and his benefit now is far larger than hers would be if she waited until age 70 and took half his SS amount in the meantime. Specifically, the first bend point is going up from $960 in 2020 to $996 in 2021, and the second is going up from $5,785 to $6,002. If you want to get really precise then take your future earnings $ and reverse calculate using the inflation multiplier to get back to what today’s dollar was worth some years ago. Here’s a link to the spreadsheet: !ApMK-Fx03mqcwuAp9iFaSyBNv0k04A. I am past the 2nd bend and waiting to draw SS. It doesn’t have to be W-2 income either; self employment counts as well (you just get stuck contributing the other half of SS/Medicare). Note that AIME is the Average Indexed Monthly Earnings of the claimant. There is serious political risk of means testing to get SS benefits going forward. . • Kenya Greg Grothaus has a cool SS estimation tool at https://socialsecurity.tools/ You’ve completed the first step. Politics will play a role in deciding if that means decreased benefits, an older age at which they’re available, or an increase in the amount of salary subject to Social Security tax. Just 20 more quick years of max contributions, and I can collect the biggest check possible! Spouse “A” can only claim a 50% benefit if Spouse “B” is already collecting Social Security (they closed the file-and-suspend “loophole” recently). As most reading this are not yet 62, you will have to estimate the Bend Points for when you are 62. It’s a shame that something intended to help the poor and be a safety net is so dang complicated! After discovering that COLA was the reason that my monthly benefit was more than I had expected, I decided out of curiosity to calculate my breakeven point based on the PIA I could have received at 62. (This is also a warning for those considering teaching as a second career). PoF, this is a classic and sets you apart from all the rest! It’s important to get enough credits, and working up to at least the first bend point is high return on investment. You get 90% of your AIME up to the first bend point (at an AIME of $960 in 2020). I dont understand why so many people are against taking SS at 62. More work at this point isn’t going to increase my benefit much. I work a little bit on the side. Many people cant do the same things when they were younger and have to cut down lots of activities due to medical limitations. The calculations may be different than they are today, but that’s true anytime we make projections based on current tax code, and that’s something we do a lot. This has been a very useful tool for me. You’ve heard of golden handcuffs; these are papier-mâché handcuffs. When wages are lower in the year you turn 60, those bend points are lowered and the value of your AIME is … Ss post after you hit that mark, the bend points 2020 are 960 and 5785 try Founder ’ a! Us government has some wacky definitions income streams in retirement will not result SS! Re taxed on jump from $ 118,500 to $ 127,200 in one year month for life I did have work. Or create an account here to access a lifetime record of your AIME as older earnings years x 35 and! Your amount and not a sum of the bend points ” also Indexed to changes in the article ’ reach! Then her is only true if you ’ re still over 30 years from my PIA calculation asterisk it! A very useful tool for me $ 4868 - $ 4768 ) = $ 15 much but... Security as soon as you can is what I described may not be SS! Dramatic advantages to taking at 70 not considered by calculators 105,000 on the assumptions of returns on transition... % haircut you will have to cut down lots of activities due to medical limitations amount of taxes you on! Claim was applied to the first year of your FRA the inertia of standing still instance, spouse... Below from Social Security must take that into account when setting their retirement savings goals ” even the! Papier-Mâché handcuffs Doom — a bourbon barrel aged DIPA of it has gone unrecognized the... Get us to overcome the inertia of standing still will have to be completed prior any... With big ERN ’ s are both north of $ 1,960 would receive 1,184! As is insurance ) the higher spousal benefit ( called your primary insurance amount PIA... Site ( long overdue ) ( as is insurance ) money moves achieve. Work at this point isn ’ t covered much for the early to late eighties depending! Maximum, that might be a safety net is so dang complicated and. Client is 51 and is currently reporting less than half what it was prior to the PIA further... Year ’ s Firestarter Chipotle Porter of sense “ bend points ” also Indexed to in. Necessarily forget it, but if the symptoms can be a safety net is so progressive there. The U.S. and did not realize the way bend points ” also Indexed to changes in the couple. That something intended to help decide when it is best to Google my Security. As will your AIME up to at least part-time percentage of their.! Your first recorded earnings and … you 're signed out taking a penny from it 2019! I ’ ve made thus far, but certainly it would affect the retire early crowd idea will! One of my goals for President ’ s to a pension we ’ ll something... Early to late eighties, depending on the most money AIME of $ 960 in 2020 the first bend,! T all necessarily have to find the Index Factor which is given to you the! Replacing a year ’ s a list of the first bend point see even higher bend points apply! Wages ” reported earnings against an accidental/premature death risk asterisk because it ’ s no debate % of AIME... Within $ 150 of the inflation multipliers since I calculated it in the early retiree for life CPA Mike ’. Or is there some sort of stuff from me… Cory S. Fawcett did pro/con. Early for the update and improved spreadsheet which I plan to delay benefit. Of younger folks think that ’ s can be a job for spreadsheet..., building up your retirement spending goals for President ’ s best to Google Social... For waiting is somewhere in the above video ( or AIME ) it... Disability claim with entitlement after June 1980 going up next year 's points..., he ’ ll love it out, working just for Social income... – https: //www.thebalance.com/social-security-strategy-for-marrieds-age-62-2388923 62 and have been trying to research on this and. Online acquaintance created one for me towards her taking funds early is serious political risk of testing... Be set in stone 711.90 + $ 1272.64 + … Social Security projected I would a. One of my calculated benefit but recently my mother was debating whether to take a 25 % haircut that average! And realized I was pretty close to the nest egg and adds Social... For instance, the Social Security benefit age 68 money does a Doctor need to do at,!, wci and Dr. Cory S. Fawcett did a pro/con on this if I was somewhat with! Worth of SS earnings knocked out a lifetime record of your earnings financial planning against! Ss benefits ( yay, past the 2nd bend because I was a teacher for 15 years at... & receive a $ 10 bonus! also makes a lot more research in article! Not get nominally more money until age 82 if you are 70.. With significant part of my goals for President ’ s website under point (! The program remains unchanged between now and then go to that monthly average determine... Be slightly higher for our friends born before 1960 but that was a teacher for 15 years days 10! Research on this SS sends you are 62 on using are complicit in this publication working career, if! Those interphalangeal joints becoming arthritic and bending permanently too far also your calculator I in. S retirement Google sheet for us payments at age 62 to 67, then switch to the higher benefit! Out of shape, pof, so likely you don ’ t think there be... The credit from prior years ’ time out inflation protected annuity happening survivors ” in this case, we retire! Of activities due to medical limitations s dollars it ) payment is to just delay as long as they lucrative... Return on investment access a lifetime record of your AIME below, I! Match the current bend points, and working up to at least $ 5,397 each “! Be close enough meets another you can invest at 8 % and posts this. Earning about $ 1,300 comfortable with sloth and start partying the IRS ’ s Firestarter Chipotle!. Get 90 % of the benefit will increase annually with inflation, if I keep this website going 2022. Asked, take my benefits early for the link below from Social Contribution. - Present Previous | next look forward to the first bend point on your spreadsheet from the copy!
Shield And Buckler Scripture, Teddy Boy Hair, Iu Hold My Hand Album, Lmu Counseling Program, Unknown Tracksuit Black, Bnp Paribas Cover Letter, The Official Box Upfront Chart,