Hi Larry!
I've enjoyed reading your insights on John Mauldin's newsletter. Thank you.

All of the Soc Security calculators assume that I will be making the same income as I did in 2019. Due to COVID-19, many of us are taking pay cuts and being furloughed. I'm in the trade show industry, so it will be a long slog with lower income.

Specifically, I am 62 and furloughed to half pay. Will this lower income significantly reduce my full retirement benefit at 65.5? Are there other considerations that come into play when deciding when to retire during our current economic situation?

Thank you,
Maureen

Hi Maureen,

I guess that depends on what amount you consider to be significant, but I think it's safe to say that any difference in your rate that's caused by your reduced earnings won't be substantial. I can't estimate the effect of your lower earnings in dollars, though, because there are too many variables involved.

Your Social Security retirement benefit rate will be based on an average of your highest 35 years of wage-indexed earnings. So, if you've already had at least 35 years with earnings on which you've paid Social Security taxes, then any current or future earnings that you have would only increase your benefit rate if your earnings in a year are higher than in one of your previous 35 highest years. Even if you stopped working altogether, though, it wouldn't reduce your rate. Instead, it would just mean that you wouldn't be increasing your rate with higher years of earnings.

The benefit calculator in our software (https://maximizemysocialsecurity.com/purchase) allows you to enter your projected current and future earnings so that you can gauge the effect of the new earnings on your benefit rate. The software would also allow you to compare your filing options so that you can determine the best strategy for maximizing your benefits. By the way, your full retirement age (FRA) wouldn't be 65.5 as you mentioned. If you were born in 1957, your FRA would actually be age 66 & 6 months.

Best, Jerry