The answer to yesterday's multiple choice question is: d) Your Social Security retirement benefit will be based on your highest 35 years of lifetime earnings.
When you apply for retirement benefits, Social Security will look at all of your yearly earnings, index them to the national wage index for the year you turned age 60, and select the highest 35 yearly amounts. These are then averaged and converted to a monthly amount called an Average Indexed Monthly Earnings (AIME) which is then used to figure your monthly benefit. The higher your AIME is, the higher your benefit will be.
When planning your retirement date, keep in mind that working even a year or two longer may increase your benefit if those extra earnings are higher than the lowest yearly earnings used in your 35 year average!
Subscribe to:
Post Comments (Atom)
.jpg)
Posts
What is the highest Social Security amount a person is allowed? There is a limit on it, right?
ReplyDeleteThanks, Diane. I am confused - what about the highest 40 quarters?
ReplyDeleteThanks for the questions!
ReplyDeleteBeverly - The maximum benefit for a person retiring this year at 66, is $2323 per month. This assumes the retiree earned the maximum under Social Security for the last 35 years through 2008. The maximum benefit changes every year with changes in the maximum earnings and COLA adjustments so next year's maximum will be different.
Jean - The retirement benefit rate is computed based on the highest 35 years of earnings. The 40 quarters (or credit) requirement is the minimum amount of work to be insured or vested for Social Security retirement. For example, if you have worked and earnedat least 40 credits, you will be guaranteed a monthly retirement but your average earnings (AIME) is based on 35 years even if you worked only 10 or 15 years. Having one or more zero years of earnings included in your AIME will lower your benefit rate. This affects many women who have periods when they left the work force to care for children or family.
How much higher would my Social Security be if I collect at 66 my full retirent age but keep woring for another 5 years.This will higer my monthly Social Security but how can I figure out how much higher it will be?
ReplyDeleteSince your benefit rate is based on your highest "indexed" 35 years of earnings it is impossible to answer your question without more information. Just remember that:
ReplyDelete1. Your Social Security statement estimates ASSUME you will continue working and earning the same amount you now earn until the age at which you retire.
2. Additional years of earnings will only increase your benefit rate if the new year is higher than the lowest year used in your 35 year average.
If you want estimates based on other assumptions, I suggest you use the online Retirement Estimator Social Security provides at: http://www.ssa.gov/estimator/.