Calculating Social Security Estimate

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Darth Xanadu
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Location: Middle Earth

Calculating Social Security Estimate

Post by Darth Xanadu » Tue Mar 13, 2018 1:33 pm

I'm trying to replicate how the SSA calculates my Primary Insurance Amount. I believe I have most of it figured out, but wanted to run 2 questions by the community.

1) Since I'm not yet 60 years old, the "average wages" used to calculate the index factor is unknown. I believe the SSA uses an inflation estimate to age the most recently determined average wage amount into the future. I've been able to reverse engineer this inflation amount, but does anyone know if there is a source for this estimate? Is the same concept applied to the bend points (as I understand it, the bend points for when one turns 62 are used in the calc, do you know if SSA uses similarly aged data for estimates, or just current bend points)?

2) Does it follow that it's harder for wages earned after turning 60 years old to count in the calculation since by definition your indexed wages are less than your actual wages? Is that right? I guess it's all dependent on past earnings since it's the highest 35 years but it's true that indexed wages < actual wages after Age 60?

Thanks all!
DX
"A courageous teacher, failure is."

pshonore
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Re: Calculating Social Security Estimate

Post by pshonore » Tue Mar 13, 2018 2:01 pm

Here's how its calculated (with the worksheet) for someone turning 62 in 2018

https://www.ssa.gov/pubs/EN-05-10070.pdf

Darth Xanadu
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Re: Calculating Social Security Estimate

Post by Darth Xanadu » Tue Mar 13, 2018 2:04 pm

Yes, thank you for sharing that pshonore. I have reviewed that document previously, but it doesn't address my questions.
"A courageous teacher, failure is."

soccerrules
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Re: Calculating Social Security Estimate

Post by soccerrules » Tue Mar 13, 2018 2:16 pm

Darth-
I by far am not the smartest mind in my brain. :( I don't follow your 1st question, sorry

#2. It is my understanding that once you reach 60 your wages are no longer index'd. ($1 = $1) I guess if the wages are "as earned" without indexing-- I am not sure if there is an inflation factor considered -- i don't know.

What I do know?
100K in Indexed earnings past the 2nd bend point is worth @$35/mo at FRA. (sorry that ain't much)

I have tried to determine how to maximize SS benefit and have come to the realization:
1) Past the 2nd bend point your are not moving the needle very much. $500K in indexed earnings adds $2,143/ year to SS benefit at FRA (not much).
Past the 2nd bend point formula- Indexed Earnings divided by 420 mo (35 years) multiplied by 15%. ($500,000 / 420 months) * .15 = $178.57/mo
2) Working past the "2nd bend point" is really more about adding savings to nest eggs and covering current expenses -- NOT adding to SS benefit.
3) Delaying past FRA and earning 8%/year is really valuable. On a $3,000/ FRA benefit , 8% equals $240/mo -- that is the equivalent of $672,000 in indexed earnings past the 2nd bend point- or approx 4 years maxed out indexed earnings.
($672,000/420)*.15 = $240/mo
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Mlm
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Re: Calculating Social Security Estimate

Post by Mlm » Tue Mar 13, 2018 2:27 pm

I'm exactly sure what you are looking for but this may help. You can submit a future year and see the indexing factor used.

https://www.ssa.gov/OACT/COLA/awifactors.html

aristotelian
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Re: Calculating Social Security Estimate

Post by aristotelian » Tue Mar 13, 2018 2:44 pm

You can get a very accurate estimate using your earnings data from SSA.gov cut and pasted to the tool here:

https://socialsecurity.tools/app.html

This will tell you your current estimate as well as manipulate your claiming age and additional years of working.

Texanbybirth
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Re: Calculating Social Security Estimate

Post by Texanbybirth » Tue Mar 13, 2018 2:55 pm

aristotelian wrote:
Tue Mar 13, 2018 2:44 pm
You can get a very accurate estimate using your earnings data from SSA.gov cut and pasted to the tool here:

https://socialsecurity.tools/app.html

This will tell you your current estimate as well as manipulate your claiming age and additional years of working.
That's a pretty nifty tool! As someone with over 30 years to go, I think it's mostly meaningless for me to play around with stuff like that, but it's still fun in a financey-sort of way. Thank you for sharing it! :beer

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