Really??? Have you actually run the numbers to prove that to be true?
Folks, I can not begin to tell you how many people have contacted me and shared that they are in a crappy, old job but don’t want to leave because of the impact “retiring” will have on their Social Security benefits.
So, I did a video on that topic to show EXACTLY how this works. I use the Social Security Wage Indexing factors for a 55 year old, as well as a rather mainstream income history for this theoretical retiree too.
I’m telling you, the numbers will shock you. Work an extra 7 years to increase your benefit by $100 a month? Is that worth it? Work an extra 2 to increase your benefit by $20 a month?
The issue that many people don’t understand is what your Averaged Indexed Monthly Income (AIME) is and how that determines your Social Security benefit.
Your AIME is simply your top 35 years of earnings INFLATED with a number based on your year of birth added together and then divided by 420. I show you this specifically in the video.
Let’s say you have an AIME of $5500. You’ll get 90% of the first $926 (2019 numbers) for your Social Security benefit. You’ll get 32% of the next $45. So, in this case, your benefit at FULL RETIREMENT AGE will be $834 + $1463 or $2297
What if you added another $200,000 in total earnings over the next 3 years by continuing to work. What will that do to your benefit? It’s actually pretty simple to calculate.
Take your initial AIME of $5500 and times by 420. That gives you $2,310,000 of TOTAL indexed earnings. Now add $200,000 to that. Thus, with those additional 3 years of work your TOTAL indexed earnings will now be $2,510,000.
Divide $2,510,000 by 420, (again SS takes your TOP 35 years of earnings. 35 years at 12 months a year equals 420 months) and you get an AIME of $5,976.
Now we calculate your benefit amount based on that AIME
First $926 * .90 = 834
Next $4657 * .32 = 1490
But now we have some money in the THIRD of the 3 bend points for determing your Social Security, which pays 15% for every $1 you have.
In this example $393 * .15 = 59
Add those all up (834+1490+59) and we get a benefit of $2389 at Full Retirement Age of 67, which is exactly $86 a month MORE than what it was before we worked those extra 3 years.
Is it worth it? You be the judge of that. But please don’t fall for the fallacy that working longer will greatly increase your benefits. It simply is not the case…Now there are exceptions. I’ll do another video today where I show what happens to a stay at home mom who jumps back the workforce when the tax-credits (I mean the kids) have left home.