GreenGoo wrote: Wed Jul 05, 2023 2:21 pm
Kraken wrote: Tue Jul 04, 2023 11:41 pm
Daehawk wrote: Tue Jul 04, 2023 11:14 pm
Getting paid for living is nice isn't it?
My SS record shows that I have contributed about $100k over my 50+ years of work, and my employers have paid the same. For the past 15 years I've paid both the employee and employer parts myself, as all self-employed people must do. It will take me about 96 months to collect that much in benefits. Should I live that long, I'll be 74.5 years old before I come out ahead. I'll also keep working for some years after I "retire" so I'll be in the weird position of paying SS taxes while drawing SS checks. If I'm going to get paid for living, it's with my own money.
Yes, I know SS is pay-go and it's not really my money coming back; my money was spent as it was paid in, so I'll technically be mooching off the young. Please don't tell them.
Don't forget all the inflation over your working lifetime. It will almost certainly be more than 96 months to come out even in terms of buying power.
SS has been indexed for inflation since 1975. The COLA only directly affects those who are actively collecting or who have passed the age of 62 and are eligible to collect, but your wage base is regularly adjusted to bring up the value of your earlier years.
There's a good explanation here.
The basis for your Social Security benefit is a figure known as your average indexed monthly earnings, or AIME. To arrive at your AIME, the program takes the actual earnings for each year you worked and adjusts the years earlier in your career to bring them closer to what you earned after age 60. It then averages the 35 years of highest indexed earnings and divides that number by the 12 months of the year. The resulting figure is your AIME. The administration applies a specific formula, based on your first year of eligibility, to the AIME to arrive at your PIA.
Here's the bottom line: You only receive COLA adjustments if you apply for retirement benefits after age 62. Specifically, you get adjustments for any years between your first eligibility (at age 62) and your filing date. If you claim Social Security right when you turn 62, you may not get any of those adjustments.
I turned 62 in 2019 so my basic benefit has increased by 1.6, 1.3, 5.9, and 8.7% COLAs since then, on top of the routine annual adjustments to my AIME.
50 years of inflation have robbed me of the purchasing power I would've had if I had banked/invested all of my contributions, or even if I had just spent the money as it came in...but that's being partially offset by a magic formula. The longer you wait to claim, the bigger your check gets; between your full retirement age (66.5 for me) and the mandatory retirement age of 70, your benefit goes up 8% per year. That's a mighty fine guaranteed return if you think you'll live long enough to enjoy it, and a strong argument against filing at age 62 unless you really need the money and/or are in poor health.