I was born in 1963. I have in 35 years of work. I have worked for a corporation for 29 years, but have retired from the company and will work for a school system for the next 5-7 years. My salary in 2022 is roughly 4 times what it will be for the next 5 years. People keep telling me that having the lower salary will lower my social security benefit. Some say that my benefit will only be based on the last 5 years. I don't understand why if I already have in 35 years. The ssa site calculator does show my benefit going down by $65/mth. Can you help me understand if working at a lower salary for the next five years will significantly reduce my benefit? Thank you.
Hi. Your benefit rate can't go down as a result of working at a lower paying job, unless your earnings at the school system are exempt from Social Security taxes and you get a pension based on those non-Social Security covered earnings. In that case, you could be subject to a benefit reduction caused by the Windfall Elimination Provision (WEP) (https://www.ssa.gov/pubs/EN-05-10045.pdf).
Whenever you eventually apply for your Social Security retirement benefits your benefit rate will be calculated based on your highest 35 years of wage-indexed Social Security covered earnings, regardless of when you had those earnings. If you have a future year(s) of earnings that isn't among your highest 35 years, that year will simply be disregarded and not used to calculate your benefit. Therefore, by taking a lower paying job you can't cause your benefit rate to go down.
I'm not familiar with the benefit calculator on Social Security's website, so if it's giving you a lower benefit rate I can't give you an explanation. Oftentimes, however, Social Security benefit statements will show an expected future benefit rate that assumes a person will have future earnings that would increase their benefit rate. If those higher earnings years don't materialize, then the person's benefit rate may end up being lower than the previous estimate. That doesn't mean that the person's benefit rate went down, though, it just means that it didn't go up like it would have if the person had continued working at a higher rate of earnings.
It sounds like you may want to strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to get accurate benefit estimates and to fully analyze all of your various options so that you can determine your best strategy for maximizing your benefits.