Ask Larry

How Will A Reduction In My Earnings Affect My Benefit Rate?

Hello -- I will be 63 in June. I am and have always been single. I work, but my work looks to be dropping off substantially this year due to changes in the company. I would llike to know if I should file for social security benefits soon because it looks like I will earn substantially less than I did in the last 15 years. I obviously want to maximize my benefit; however, I do want to retire very soon anyway. This change in my income was unexpected, so I have not figured out what is best -- use savings and wait or file now? The focus of my question is really the effect this low year of income will have on my overall benefit. Thanks!!!

Hi,

Your retirement benefit rate is based on your highest 35 years of wage-adjusted earnings (https://www.ssa.gov/pubs/EN-05-10070.pdf). If you earn less this year, your benefit rate won't go down, it just won't increase by as much as it would have had your earnings been higher.

It's generally better to wait until age 70 to start drawing benefits if you can afford to do so. That's when your benefit rate will reach it's maximum point. You may want to consider running the maximization software available on this website in order to explore all of your options. The software allows you to enter your projected future earnings, which should answer your question about the effect that your reduced earnings will have on your benefit rate.

Best, Jerry

Posted: 
Feb 4 2017 - 5:00pm
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