Social Security

[Dan Murphy]

so we may soon stop withdrawals from our IRAs except in emergencies.

Except for RMD's in the future.

 

[tvguy]

Except for RMD's in the future.

Yes, But who knows if they will push it back even more from age 72 by then. And right now my RMDs are set up to stay within my IRA, I just have to pay the tax on the RMD.

 

[longboard55]

This RMD push back is a joke. It's a retirement account. If you do not need it until 72, you do not need it much. Another back door tax cut for the super wealthy. They put these things in and say they are helping the middle class. No they are not.

 

[tinkerbellandpeterpan]

I'm in a weird situation where I was a relatively high income earner early in my life and now in my mid 40s I am a very low income earner. This is going to definitely affect my social security, but I suppose I'll figure it out a little later. I know we all have complaints, but it is annoying that I front loaded all of those SS payments and because I have a lower paying job now that none of that matters.

 

[MillauFr]

This RMD push back is a joke. It's a retirement account. If you do not need it until 72, you do not need it much. Another back door tax cut for the super wealthy. They put these things in and say they are helping the middle class. No they are not.

Reminds of a former coworker of mine. He bought 100 shares of Microsoft circa 1985. All he did was complain about the taxes he was going to have to pay when he sold. He never spent a dime. Crazy. I think that is almost as bad as the people maxing out their credit cards to go to Disney. I guess balancing saving and spending wasn't in his wheelhouse.

 

[john7994]

I'm in a weird situation where I was a relatively high income earner early in my life and now in my mid 40s I am a very low income earner. This is going to definitely affect my social security, but I suppose I'll figure it out a little later. I know we all have complaints, but it is annoying that I front loaded all of those SS payments and because I have a lower paying job now that none of that matters.

I would check the aforementioned site and check your SSA Statement - I think this is why there is such a complicated indexing approach as to not penalize for front-loading of earnings. But again, best to check.

 

[tinkerbellandpeterpan]

I would check the aforementioned site and check your SSA Statement - I think this is why there is such a complicated indexing approach as to not penalize for front-loading of earnings. But again, best to check.

Thank you for mentioning it. I should investigate further.

 

[Dan Murphy]

And right now my RMDs are set up to stay within my IRA, I just have to pay the tax on the RMD.

In kind transfers are great. Actually, the asset does come out of your IRA .wrapper' and into a regular, non-IRA account, without actually selling the asset. It does not stay within the IRA.

 

[tvguy]

In kind transfers are great. Actually, the asset does come out of your IRA .wrapper' and into a regular, non-IRA account, without actually selling the asset. It does not stay within the IRA.

Everything my broker has done for the past 30 years is designed to minimize tax liability.

 

[Dan Murphy]

Everything my broker has done for the past 30 years is designed to minimize tax liability.

As s/he should.

 

[JLTraveling]

I'm in a weird situation where I was a relatively high income earner early in my life and now in my mid 40s I am a very low income earner. This is going to definitely affect my social security, but I suppose I'll figure it out a little later. I know we all have complaints, but it is annoying that I front loaded all of those SS payments and because I have a lower paying job now that none of that matters.

That's actually incorrect. SS is based on your "high three," that is, the three years that you earned the most. Doesn't matter when in your career, and they don't even have to be consecutive. Those three years are what your benefits are based on.

 

[tinkerbellandpeterpan]

That's actually incorrect. SS is based on your "high three," that is, the three years that you earned the most. Doesn't matter when in your career, and they don't even have to be consecutive. Those three years are what your benefits are based on.

That’s what I thought but this thread led me to think something different. On me to do the research to confirm. But thank you!

 

[RamblingMad]

That's actually incorrect. SS is based on your "high three," that is, the three years that you earned the most. Doesn't matter when in your career, and they don't even have to be consecutive. Those three years are what your benefits are based on.

This is clearly wrong. It’s the average of the highest 35 years with a ceiling based on the social security limit each year. The limit this year is about $160k. If you make more, it won’t contribute to your average. And if you have worked less than 35 years, then you treat those years as zeros. This is why most can simply add up their earnings and divide by 35 to get close. You won’t pick up the indexing, but you’ll be close.

I posted the PIA calc above.

 

[JLTraveling]

This is clearly wrong. It’s the average of the highest 35 years with a ceiling based on the social security limit each year. The limit this year is about $160k. If you make more, it won’t contribute to your average. And if you have worked less than 35 years, then you treat those years as zeros. This is why most can simply add up their earnings and divide by 35 to get close. You won’t pick up the indexing, but you’ll be close.

I posted the PIA calc above.

No. Look again at this link: https://www.ssa.gov/oact/cola/Benefits.html
The 35 years are used to INDEX your earnings, which means to adjust your lifetime's worth of earnings to account for inflation. That way, the $7700 you earned in 1965 or whatever is worth whatever it's worth today, not a flat $7700. Indexing doesn't HAVE to occur. Plenty of people retire after less than 35 years of working (example: my dad, who retired on disability at 48. He certainly didn't start working at 13). It just ensures that you're being fairly compensated at today's rates for work you did a long time ago.

THEN, after indexing, they choose your highest paid three years and use those to calculate your benefits. Direct quote from the link above: "After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount." There are a couple of later calculations, such as a reduction if you retire early or a bonus if you retire late, but it's all based on that high three.

 

[RamblingMad]

No. Look again at this link: https://www.ssa.gov/oact/cola/Benefits.html
The 35 years are used to INDEX your earnings, which means to adjust your lifetime's worth of earnings to account for inflation. That way, the $7700 you earned in 1965 or whatever is worth whatever it's worth today, not a flat $7700. Indexing doesn't HAVE to occur. Plenty of people retire after less than 35 years of working (example: my dad, who retired on disability at 48. He certainly didn't start working at 13). It just ensures that you're being fairly compensated at today's rates for work you did a long time ago.

THEN, after indexing, they choose your highest paid three years and use those to calculate your benefits. Direct quote from the link above: "After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount." There are a couple of later calculations, such as a reduction if you retire early or a bonus if you retire late, but it's all based on that high three.

https://www.ssa.gov/benefits/retire...he amount of,age you start receiving benefits.


“The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.”

 

[JLTraveling]

https://www.ssa.gov/benefits/retirement/planner/stopwork.html#:~:text=The age you stop working can affect the amount of,age you start receiving benefits.


“The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.”

Believe what you want. I gave you a direct quote. I went through this process, with a lawyer, when both my mom and my dad had to retire on disability long before they HAD 35 years of earnings. But I know from previous posts that you have to be right even when you're dead wrong. So be it. I hope everyone else in this thread will contact their own attorneys/financial planners rather than relying on either of us for advice. Peace.

 

[amylevan]

https://www.ssa.gov/benefits/retirement/planner/stopwork.html#:~:text=The age you stop working can affect the amount of,age you start receiving benefits.


“The age you stop working can affect the amount of your Social Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits.”

I believe the statement about the age you stop working is in reference to reduced benefits based on retiring before your full retirement age.

 

[amylevan]

I believe the statement about the age you stop working is in reference to reduced benefits based on retiring before your full retirement age.

I stand corrected. https://www.ssa.gov/benefits/retire...ts and,reduces your retirement benefit amount.

 

[RamblingMad]

I believe the statement about the age you stop working is in reference to reduced benefits based on retiring before your full retirement age.

If you don’t work 35 years, then those years are treated as zero years. It’s basically dividing your total indexed earnings by 35.

This is for filing for retirement, not disability.

Calculators are available on the SSA site. I recommend those if you don’t intend to work to retirement age, which is what the yearly SSA doc assumes.

Lots of info on this in the FIRE community.