Do I have to stop working to keep my Social Security benefits? – Reading eagle

Dear Rusty >> I recently took a big pay cut at my job. Several older friends have advised me not to continue working much longer in this low-wage job because it will affect my social security when I’m ready to start drawing it. I am currently 62 years old and I thought I would work until about 65. Friends inform me that my SS check will be less because of the lower salary. I have tried calling my local and state social security office and no one answers the phone to see if this is true. I don’t want to take this pay cut just to work (maybe) 3 more years and take a lower SS benefit when I can retire now and get a bigger SS check. Advice please!

— Anxious about Social Security

Dear Anxious >> I think your well-meaning friends are causing you unnecessary anxiety because your Social Security benefits are not calculated based on your last years of income. Rather, your lifetime earnings determine your basic Social Security benefit, known as the Primary Insurance Amount (PIA).

Your PIA is what you get if you ask exactly your Full Retirement Age (FRA) which for you is 66 years and 10 months. If you apply for SS before your FRA, your benefit will be permanently reduced (by approximately 29% if you apply at age 62 and by approximately 12% if you apply at age 65).

Your PIA is calculated using the highest 35 years of earnings (adjusted for inflation) during your lifetime, and your most recent earnings will only affect your SS benefit to the extent that they fall within the 35 years of life used. If you don’t have a full 35 years of earnings yet, then quitting work now would actually hurt your SS benefit, because SS still uses 35 years to calculate your benefit, even if you don’t have a full 35 years of earnings. . In this case, they would use “zero” earnings for enough years to reach age 35, and those years of zero earnings would result in a lower benefit. So even if your recent income is lower than before, it’s still higher than the $0 that SS will use if you’re not at least 35, so that lower income will help your SS not hurt it .

The bottom line is this: your actual SS benefit will not be reduced just because you now have lower earnings; instead, your benefit will be based on your highest earnings for 35 years in your lifetime. But any benefit estimate you have now assumed would continue to gain at the most recently reported level until you hit your FRA. So whether you stop working now or simply take a lower salary, your actual benefit at the time of your claim will be less than your recent Social Security quote.

Also note that it’s a common misconception that SS benefits are based on the last 10 years of earnings, but that’s not true. Your benefit amount will be calculated based on your average lifetime monthly earnings (the 35 years you earned the most, adjusted for inflation).

Russell Gloor is a Certified Social Security Advisor by the Association of Mature American Citizens: https://amac.us/social-security-advisor.

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