How Much Will My Current Earnings Affect My Future Benefit Rate?

Dec 18 2017 - 2:27pm

I'm 61. Wife is 56. I sold my business last year and am gigging $12K +/-. My wife is a gov worker pulling $87K. MySocialSecurity says I've qualified for $1,580/mon at 66yr/4mon, having worked 38 of 42 years. MySS says she is qualified for $2,085/mon. at 67 years having worked 33 of 38 years. Four questions:
1. If I gig $12K for three years (bumping earning years of $650, $1,800 and $2,000 from my 35 year history), will that significantly change my monthly SS?
2. If she pulled $87K for three years (eliminating her meager earning years from the SS calculations ) will that significantly change her monthly SS?
3. If she joined me gigging $12K a year, would that decrease the $2,085 Full Retirement Age benefit she would receive? (The MySS explanation is confusing)
4. Our tentative plan is for me to begin collecting SS at 62, her to work until 60 and begin to collect SS at 70. Is that a prudent plan?

Hi,

The benefit calculator in our maximization software can give you a more precise answer to your first 2 questions, but especially in your wife's case the answer can only be closely approximated. This is because Social Security retirement benefit rates are based on an average of a person's highest 35 years of wage-indexed earnings, and the data needed for the indexing calculation isn't available until shortly before the year in which the person turns age 62 (https://www.ssa.gov/pubs/EN-05-10070.pdf).

Given what you've stated, though, I would guesstimate that your working another 3 years at $12,000 per year would likely raise your full retirement age rate (PIA) by roughly $25. In your wife's case, another 3 years at $87,000 might raise her PIA by somewhere between $150 & $200.

Regarding your third question, the answer depends on what level of earnings is being projected by Social Security to arrive at their estimate. They generally base their projections on an assumption that the person will continue working and earning as much annually as they did in the most recent year in which their exact earnings are known. So, if Social Security is projecting that your wife will earn $87K until age 67, but she
instead reduces her earnings to $12K per year for 3 years with zero earnings after age 60, that would likely result in Social Security's estimate ending up being much too high. And, that same principle would apply to the estimate that they gave you if Social Security is assuming that you will earn more than you actually end up earning in the next several years.

As mentioned before, though, the best way to get the most accurate possible benefit estimates is by using our maximization software. The software also allows you to enter variable amounts of projected future earnings so that you can gauge their effect on your future benefit rates. The software will also allow you and your wife to compare your various filing options in order to enable you to determine your best overall strategy regarding when each of you should start drawing benefits. The strategy you propose in your fourth question may be okay depending on your assumptions with regard to life expectancies, but using the software will permit you to make a much more educated decision.

Best, Jerry