Published in the High Desert Advocate May 9th, 2019 Edition.
Ask Rusty – Is Social Security based on Last 3 years of Work?
Dear Rusty: I have heard many times that what is earned the last 3 years you work before drawing Social Security benefits determines what your benefit dollar amount will be. Is this true? If not, what determines your benefit dollar amount and how is it calculated? Signed: Working Still
Dear Working: Funny how true the adage – if you say something often enough, people will believe it is true. But I’m afraid that what you’ve heard so many times about how your Social Security benefit is determined is incorrect. While it’s true that the last 3 years you work may affect your Social Security benefit amount when you claim, those years alone are not what determine your benefit dollar amount. Rather, your benefit is determined using a formula, which includes the highest earning 35 years of your lifetime working career. Each year in your lifetime earnings record will be adjusted for inflation, the highest earning 35 years will be selected and your “average indexed monthly earnings” (AIME) will be computed from those years. And to clarify another often-misunderstood point, you only get credit for earnings on which you paid FICA taxes, so earnings up to the annual payroll tax cap are the only earnings counted.
For most people, the latter years of their working career are the highest earning, so it’s quite likely that your last few years of earnings will be included in the 35, which are used to determine your benefit. Once your AIME is computed from your lifetime earnings record, it is subjected to a standard formula to arrive at your Primary Insurance Amount (PIA), which is the benefit you are entitled to at your full retirement age. If you claim benefits before your full retirement age (FRA) that benefit will be reduced, by up to 30% depending upon how many months before your FRA that you claim. And if you wish to increase your benefit you can wait beyond your FRA to claim and earn delayed retirement credits of 8% per year, up to age 70. Claiming at age 70 could get you a benefit as much as 32% more than it would be at your full retirement age (depending upon the number of months after your FRA that you claim benefits).
Unfortunately, there are many myths floating around about how your Social Security benefit is determined, and what you’ve previously heard is but one variation of those myths. But reality is as described above – the highest earning 35 years of your lifetime earnings record are used to determine your average monthly career earnings (adjusted for inflation), and that 35-year lifetime average becomes the basis for your Social Security benefit. Anything else you hear to the contrary is simply incorrect.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website or email us.
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The power of prayer
A pair of Florida teens recently skipped class to go swimming off the coast of Vilano Beach, FL and were carried away by a strong ocean current. Tyler Smith and Heather Brown wound up two miles offshore treading water for some two hours. The 17-year-olds said they were so scared at the prospect of drowning that they prayed as hard as they could. And, their prayers were answered. Amen was the name of the boat that spotted and rescued them. In an interview on ABC’s Good Morning America soon after, Smith said all he could do was to pray “God, please don’t let this be the end. I still want to see my family … send someone to save us.” Crew members aboard the Amen they heard teens’ cries for help and answered his prayer.
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Reading is Fundamental
An education-minded barber in Kutztown, PA, Jonathan Escuet, is putting his money were his heart is. He pays kids $3 to read a book out loud while getting their haircuts. His aim is to give them confidence in themselves and it appears to be working.
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They choose to snooze
The bedding company, Mattress Firm, is offering students not-so-strenuous internships this summer. They’re looking for a few good “snoozeterns” who won’t be considered slackers if they sleep on the job.
Zapateria is now Alison’s JG Store
