The Income With The Max Benefits: $168,600
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- เผยแพร่เมื่อ 31 พ.ค. 2024
- SSA Quick Calculator: www.ssa.gov/oact/quickcalc/in...
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00:00 Why $168,600?
01:40 How it's calculated
02:21 Average Social Security Benefit
02:50 Max Social Security Benefit
03:55 ssa.gov Resources
04:41 Conservative Planning
06:03 Gap To Fill
08:32 Progressive Nature
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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Thanks for watching, I appreciate you!
I'll never forget when I made it past the SS cap. That is when you start noticing big differences in raises, since more of that extra money actually makes it to your bank account
I remember being so confused and asking HR why my paycheck was higher. One of thsoe nice problems to have.
Oh they stop taking additional percentages of your salary at that point?
I'll never forget it or remember it. 😂
I'm 38 now and hoping to retire at around 50 or so. My planning isn't even taking Social Security into account at all, so anything I get from that will just be a cherry on top so to speak.
You should still do everything you can to ensure you have a minimum of 35 years of salary via a W-2, regardless of whether or not you are self-employed or work for someone else. It's likely that your full retirement age won't be 67. It will likely be bumped to age 70 in the coming years. That would shift the percentages to something like 80% if you decide to take it at age 67. If the withholding still remains at 6.2% (which I believe will also have to increase) then you'd likely only see 75% to 80% of whatever SSA currently believes you would receive by extrapolating whatever you've paid so far.
Exactly my strategy also no one should ever put all there dependence on social security
What's your FIRE number ?
It is foolish not to include all known cash flows into your plan, otherwise it's not a complete plan and will not produce the most efficient result.
Im 36 and my plan is to retire by 45.
Great info for the young on how SS works, I started my company in 1984 and had a salary of 6K a year for four years until the company took off and I could settle into a good income. As I was born in 1958 I get full at 68.8 and see that I will get 3,332. at that point. My wife a teacher who took about 10 years off when we had 3 kids will be 1,888. As you, I did not plan that SS would be there, but when I looked into retirement I started to take it into consideration. I'm definitely going to send this video to the kids, I hope it educates them on working consistently throughout their 20s till they retire.
Even living in Canada, I learned something (or was reminded) during this video about SS and how earnings affect it. As you'd expect, Canadian equivalent CPP (Canada Pension Plan) and OAS (Old Age Security) exist for the same reason, a financial security blanket for seniors. CPP is based on earnings and works the same way as SS, while OAS is based on length of time spent in Canada as a citizen. The reminder part was the ability to split pension payments between spouses for tax purposes, very useful for the majority I'd bet.
Great you went through the different scenarios to show folks how to calculate what they can expect in retirement, and maybe make adjustments now during their nest egg building years, if they'd prefer a different outcome. Can't get from A to B without knowing if you're on track or not. Someday, when financial education is a requirement in schools, they can just pick from your videos and build a course, maybe a whole program. Start with the basics, then learn more advanced stuff at the end. Not sure financial advisors would be keen though, might put them out of a job..😄
Very educational video! Thank you! I wasn't really thinking about my wife and I both collecting SS, we are going to be living the high life... ha ha.
Your comment at 9 minutes about the calculations being progressive is important. For so many good reason’s the SSA algorithm is definitely not linear.
When I retired from the military after 25 years, I had about 30 years of work credit due to jobs during high school and college. I ran the numbers for my SS benefit estimates with and without returning to work to hit 35 years. For my situation, it was not a big enough bump to worry about.
Excellent video. Easy to understand and very accurate info. Well done.
I’m 52 and I earned enough to hit the maximum Social Security contribution one time by less than $500. It was nice, but I don’t see it happening again because it was a fluke.
One thing about saving aggressively for retirement is the more you save the less you’re spending and the less you need to replace in retirement! For example, if you save 15% for retirement and your spending in retirement is exactly what your spending while you’re working is you need to replace 82.5% of your income. 15% into investments and 7.5% into Social Security is how I came up with that 82.5% number. On the other hand if you save 22.5% you only need to replace 70% of your income in retirement. That’s one thing that some retirement planning tools don’t take into account making them very pessimistic about how much we need to save in order to retire.
For calculating my yearly withdrawal rate in retirement, i use today’s take home pay + 20% (which is an estimate for taxes).
For simple math, if the family’s monthly take home pay is $10,000 and we are keeping up paying the bills (not going into debt), then we will need to withdraw $144,000 per year from taxed deferred investments (401k/ira) to have the same $10,000 per month to spend on life.
@@jeeplife5262 Don't forget about your Roth retirement plans. We don't pay taxes on withdrawals from them. I'm currently putting about 40% of my retirement savings into my Roth IRA and Roth 401k.
This was the best video on the topic that I have seen. Very well presented.
My wife keeps telling me to relax and worry less about retirement. To her credit we have set ourselves up well. I have hit the max since 2000 and she just hit the max last year. I should easily achieve the max benefit and she should be close. Combined with good investments we should be in good shape. Choosing to study Engineering was the right move.
Thanks so much!
Thank you!! So helpful when I’ve been searching for this info recently. Just made an account on ssa and really cool to see my whole history of earnings. Especially one year when it was literally $269 😂 more motivation to work for many years and knock that off
Thoroughly enjoy your videos and your passion personal finance.
On the issue of the spousal 50%; it maxes out at the Full Retirement Age, no direct additional incremental benefit waiting until 70.
Financial planning tip: Marry someone who is about to retire, and go on Social Security. Who was a High earner during their working years. 🎉😂
Great info, Erin👏👏
I learned recently that taxes aren't automatically taken out of your SS payments, and that can be a tricky calculation for some; a video on that topic would be greatly appreciated.
Main reason behind this is that SSA does not have any idea how much other income you may have. If you have no income other than SS you will not owe any federal income taxes, period end of story. The only way SS benefits become taxable is for you to have other sources of income that would increase your provisional income over the threshold that your AGI, and thus taxable income, would be met. The maximum amount of your SS benefit that can ever be taxed is 85%. You can have voluntary tax withholding on your benefit if you want, you just need to notify the SSA.
Fun fact: It is possible under the current tax code for a married couple to each make 50k in SS benefits (yes you can get 50k in SS benefits if you made enough throughout your life and then throw on delayed earnings credits) for a grand total of $100k in income, and not one single penny will be subject to federal taxes if they have no other sources of income.
Another very informative video. Thanks, Erin!
Just checked my SS status. This helps me relax a lot. Thank you :D
Glad I could help! :-)
Don’t relax… it won’t be there when we need it.
Erin, I suggest you continue to save and plan as if SS will not be there for you. It definitely will not be there in its current form. It has changed a bit by increasing eligibility age in the last decade or so. Look at this way. If you have saved and invested enough to not need SS, the worst-case scenario is it does exist, and you have a lot of extra income in retirement.
I was told that SS would not be there for me, and I needed to pay for my own retirement by my father when I was in my early 20s. He said that my SS would fund his retirement, but I needed to plan as if there was nothing from SS for me. I did this, and now at SS age I see that I will get something. But it is just extra funding I had not planned on. IMHO this "worst case" is a good problem to have!
Agree 💯 if you are waiting for social security, you’re setting yourself up for disappointment
I have over 35 years of work credit and am currently replacing lower earning years with higher earning years. It’s definitely making a difference as shown on my SSA statement too. Great video!
Thanks for sharing!!
Don't forget your beginning work years are indexed (multiplied) by factors of up to 12x. I will never make that much in any of my next 10 years of work.
@@valmac1234
Where did you read that? I’ve had so many problems trying to figure out exactly how SS does their calculations.
(Edit: not doubting you - just asking)
You can probably approximate it by taking your oldest year or income and plugging it into an inflation calculator. I.e. $10,000 in 1995 is worth 19,740 today. The more time that passes with higher inflation rates the more the older income will be scaled
You are exactly the person who benefits the least f Yes, you are replacing lower paying years with higher years but unless you are between the first and second bend point your increase in SS is probably pretty small. You might be confusing the annual COLA increase with how much your AMI is actually changing.
As usual this was an excellent presentation. For someone in their 30s it's very hard to factor in inflation. When I was in my 30s I was buying gasoline for about 90 cents/gallon. I couldn't fathom $3 - $5 per gallon.
30 years from now gasoline will most definitely cost more than $12/gallon.
Nobody will be buying gas in 30 years. Gas powered cars will be relics by then.
I'm not worried about social security. I'm pushing to hit our first million invested before we hit 45. I want to hit $2 million by 50.
We'll see how it goes. It's definitely achievable. Started investing in my 20's.
SS would be nice but I'm just planning on it being icing on the cake. It still will be around since we're all still paying into it.
Nice to pay 15% or 25k from your 168k income and do not get it... Great plan 👍
You are smart. The worst that could happen is SS is around and you have extra money in addition to all the investments you made to cover the possible SS shortfall. That is a "good" problem.
I knew why you picked that number just from the title, lol. I've been thinking about this a lot. I retired 4 years ago, but during my working years I calculate I made on average about 95% of the max SS earnings limit during my 35 highest earning years. As a result my SS benefit is very close to the maximum. I'm waiting till 70 to claim. Edit: I just checked my records. The first time I hit the max SS earnings limit was 1996. The earnings limit in 1996 was $62,700.
Wow! That's serious inflation.
Sounds like you did a great job working and planning🎉
I never really thought SS would be there for me, so I saved as if it was not. I am now in my 50's and figure there WILL be something for me in SS. I have been fortunate enough in my career to have >almost< reached the max SS benefit too. So now I have a fairly sizable nest egg of my own AND a really healthily SS check due to me once I reach retirement age.
That gives you the ability to spend more in retirement.
Excellent! You rock!
I hope your right but I don’t underestimate the democrats screwing this up.
Great explanation!
Using the 2022 bend points (last year I checked), you needed about $75k average annual income ($6172 per month) to get the most out of social security for the least input (maxing th3 32% bend point). After that, you only get 15% of the extra. I.e. Averaging almost $100k per year (+2k per month) is only going to add something like $275 to $325 per month...A good amount, but that required YOU to make $2000/mo x 12 mos x 35 years = $840k more lifetime income. At 6.2% that's $52k you paid and another $52k from your employer.
Um….you DO get to KEEP money you earn above the 32% bend point!!!
@@traybern I am aware of that. Someone who is self employed may want to pay themselves a salary that maxes the 32% bend point and then take the rest of their business earnings as business profits and save the 12.4% they pay for both halves of social security for their own retirement investments. If you only have w-2 income, then you have no choice but to pay social security until you max it out for the year.
thanks for the great content!!
Glad you enjoy it!
I'm 21, and I completely forgot to take this into account when thinking about what retirement could possibly look like. It might not affect my plans for saving, but it does give a little reassurance that I'll probably be fine. Like you, my goal is to prepare so well that I don't even need it, but it would make quality of life even higher in retirement
The $168,000 amount will increase over time. In 2025, it might be something like $175,000. What should really happen to help fix the lack of funding is to eliminate the cap. No matter what you earn, you pay FICA. I'm also assuming that Congress will change the full retirement age from 67 to age 70. All they need to do is continue to increase the full retirement age by 2 months each year starting in 2028 just like what is happening right now
Full retirement at 70 and eliminate the cap. No thank you. Just let me out of the forced ponzu scheme and will worry about my family. Raising the cap is just more government led theft. Let the average household (family income of 70k) with just than 20 years left out and put 12.2% of their income into the s&p 500 and they would have nearly 650k, or a safe withdraw of 27k/ year. By 25 years you hit the one million threshold, and a safe withdrawal of 40k. Let that grow for the 35 years and they would be multimillionaires.
Why should people be forced to pay insurance premiums that aren't aligned with the insurance benefit? Either the insurance program should have no maximum benefit or it should have a maximum premium.
Yeah, I'm not really for removing the cap. I've spent my life being taxed into financial dependence (i.e, I would have hit FIRE a long time ago without giving Uncle Sam so gd much).
Tax all income, including capital gains, above $1M per year with something like a 3% social security tax and remove the loophole of the billionaires skipping taxes by getting loans against their stock portfolios/assets. At least for some limit. Loan for $1M per year, max of 30 years, sure skip taxes and treat it as a "loan". $5B loan so you can buy a yacht and a support yacht..... that's just tax evasion
Only if they dramatically move the max you can get from SS up.
Me and my wife are at 70k if we can just increase to 75k this year I'm good lol. We are very frugal.
Thank you Erin great topic. Do you think you could give your opinion on Robo advisors like Vanguard . I'm thinking of there hybrid model. Thanks
I look into making a video on this 😊
I think it’s important to mention when discussing social security that the benefits may be subject to federal income tax (and state income tax depending on the state) depending on your gross income. In the example of a married couple targeting $70,000 in retirement, 85% of social security benefits would be subject to income tax.
I made an SSA account after watching this video. Thanks!
Excellent!
Great video.. Lots of great information. Question... What if someone has a maxed out high income - but opt to leave the workplace early - let's say 60 years of age. Does that affect the SS at age 62 and / or 67....???... ThanX for a great informative video.
Good video. However, you need to explain to the takers why there is a cap on SS tax. Most think it’s because you’re not paying your fair share vs one no longer getting additional benefits.
Erin, something you didn't account for regarding income levels. Medical expenses..without proper medical insurance can deplete savings. American military veterans have a cushion with Veteran administration. While other men may have some medical coverage from work. Just something to consider..
That number has gone up A LOT every year. In the late 1990s and early 2000s to maybe 2012, I'd hit that limit around August or September each year. Then, even with raises, it started getting later in the year. Even making quite a bit more money, I hit it around the end of October nowadays.
I’m retiring this year and definitly including my social security in my plan… retiring at 62 and will take it at 62… the amount on the SSA website will be 33k a year…. thats a good chunk of change to my pension which is really good cuase I’ve been with the same company for38 years.. back in the mid 1980s pension plans were very good and I’ve maintained it all these years :)
Very nice video
Thanks!
An income above that is great because each dollar you pay less withholding due to no FICA
Erin, thanks for the great content. Question, since you touched on it in the video, regarding spousal benefits. Both of us (married) working full time jobs. Are we both eligible for our own SS or does one have to take a reduced amount?
@@anonymousbosch586I think it is only 1 year continually married before you claim social security benefits to qualify. The 10 year rule applies to ex-wives. I.e. I was married to my ex-wife for more than 10 years so when she reaches full retirement age she can claim half my benefit (without reducing mine by the way) unless she manages to earn more for her own SS account by then.
You both get your own SS. The only time the spousal benefit kicks in is if the lower earner SS is less than half of the higher earner.
Target income is $180k
Wife and I didn’t save enough when young and had $$$ student loans. Making up for it now with max 401k + Roth IRA contributions and aggressive stock investments
I just retired last year at 52 and only have 29 years of earning history. My PIA @ 67 is $3423/mth so looks like working another 6 years to have 35 years of earning history doesn't make a big difference ($3,822/mth maximum benefit). Am I looking at this correctly?
I have been tracking my account since 2013. So far so good. I wish they would lift that cap that all income gets taxed for SS so that it will remain for the long haul.
If you increase the cap (as Bernie Sanders and others suggest) then you also need to increase the benefits. In my opinion.
But I realize something needs to change very soon to keep SS solvent.
Why does the benefits need to increase? I guess specifically, why is there a cap in the first place? Why after any income over 168,000? So if you make $80K, all of it is taxed. But if you make $1M, then only the first 168? What if they lift the cap and create an income floor and not tax your wages except those over 50K (essentially, the first 50K is not subjected to SS tax). You know, for those who needs it most. @@shawnbrennan7526
Stopping upward wealth transfer would balance social security or at least a large chunk. The social security max means that pay increases to top earners, especially executives, are not taxed by social security. So, 4 decades (since Reagan) of transferring tens of billions in annual income from millions of workers to a few hundred/thousand wealthy elite has drastically reduced the social security tax base. Example: layoff 100 employees making $100k (replacing with outsourced jobs) and give $10M bonus to the executives.... Multiply this by 40 years
@@taliesin1977 yea
Would love to hear the numbers for max earning without SS benefits being hit and what type of earnings, btw.
For an 850 FICO, you should pay off all credit cards each month, not on the DUE DATE, but the DAY BEFORE THE STATEMENT DATE.
You have to log in to your account to do this as the Due Date will vary by a few days. For example Jan 14, Feb 12, March 13, etc.
Many more factors than that go into getting and keeping a high credit score! FICO scores out of 900, not 850, btw. My FICO is 856.
I pay my cards ( I have only two) every month ON the due date. I have them on auto-pay so I won’t forget. For my credit cards the due date is always the same day of the month. You can actually request this with some cards. My VISA card has a direct link to my FICO score on the app, so I can see it anytime I want.
@heidikamrath1951 the original commenter was correct. The standard FICO scale goes to 850, but 900. You're looking at a different one that's not used regularly.
@@stephanielcowart6867 That’s what I always thought, but the one tied to my card (and it does say “FICO”) goes to 900.
This makes sense for some people but really you should be targeting to lower your earned income so you pay less into ss. The 12.4% you put in ss, if invested instead would get you a much higher return
If you're earning $168k or higher, you ought to be stashing away at least $30k per year... Compounding at 7%, you'll be over $2.5M 25 years later.
In Canada, the max pensionable income for CPP is 68500. And cost of living in major cities is higher than US 😢
I'm pretty close to the max, I checked my benefits a couple days ago and at 67 it would be a little over $3500 a month. I've not earned anywhere's near the cap for most of my career but the past 10 years or so I've been bumping into it now and then. I've only worked about 30 years though, I started in '95. But that was a late start for me, I was in my mid 30's so I'm just a bit over a month away from retiring. I'll wait on benefits until I'm 67 or 70, we'll see what the numbers look like when I'm a bit closer.
I’m currently 38… $5,000 when I’m 70 will buy me a Big Mac. Invest in income properties or some inflation adjustable income. Social Security will run out by that time anyways, or the government deficit spending will be solely funding it. Your math is right (for one tier of the equation) it’s just that the base assumption that we’ll even gain benefits from this seems to be a fever dream.
I think the most important thing for people to get out of this video, since most won't have the $168k income, is that the bulk of your SS benefit comes from the lower average wages. So, the more you make, the lower the amount that is added to your benefit. So, as a lower earner, you will still be ok!
You nailed it! Bend points are a rip-off to high earners.
Would you suggest not paying SS if you own a S corp and investing the money you saved not paying SS?
Anybody else think it is interesting that when SS program fixes are talked about it never involves adjusting max benefit? I’m curious why they are willing to raise minimum age or reduce benefits but not alter this part of the system.
Does this apply if the $168k is from self employment?
An idea for a future video may be to talk a bit more about how having zeros in your best 35 years of income will affect your social security PIA. And the thing to note there is the two bend points in calculating your PIA. They calculate 90% of the average monthly income up to the first bend point and 35% up to the second bend point. Anything beyond that second bend point only increases your PIA by 15% up to the maximum benefit. So I figure if your average monthly income over 35 years (adjusted for inflation to today’s dollars) is over the second bend point then you’ve hit the Pareto point in my opinion.
Question: Are social security benefits calculated on your gross income or net income? My net income is very low because I am self employed and dedect expenses. My gross income is decent though.
Self employed here too, my accountant sends in the full 12.4% up the maximum of my gross income ($168,600 in 2024).
Erin, I really like your channel. You have a warm style and make things easy to understand. I have an idea for a video which would answer the question of can you contribute to a Roth IRA without converting a traditional IRA. My wife worked for an employer without a retirement program so I contributed to a traditional IRA for her. Now, she has employment with a 401k and match. I would like to open a Roth IRA for her in addition to the employer based 401k, without having to convert the traditional. Is this possible? We are in our 50s, so know that your channel provides useful information at any age. Thank you. Ron
You can certainly open a Roth IRA and begin contributing up to the max ($7000 in 2024) while having the employer 401k. Their contribution limits don't affect each other. You don't have to convert the old traditional IRA to the Roth - the old IRA can just sit there and be left to grow.
The traditional IRA and Roth IRA do share contribution limits - so you could contribute to both if you wanted. Like you could put $4000 in the Roth IRA, and $3000 in the traditional IRA - for that total of $7000 for example. But just because you want to now open a Roth doesn't mean you have to do anything with the old traditional account.
I hope understood your question correctly. Thanks for watching!
Thank you. It’s very impressive that you responded to my question. Yours is the first response I’ve ever received from a you-tuber.
The reason for my question is that I thought there was a rule that required the balance on an IRA to be zero before making a Roth contribution. Is this only true with a backdoor Roth. I didn’t realize that I could have both a Roth and traditional IRA (not a 401k) at the same time. This allows me to save taxes now.
Thank you and keep making great videos!
Genuine question, is Social security will still be there when Millennial reach retirement age ? I read that Government has been tapping to people Social Security money.
You really glossed over the bend points that lead to SS replacing a larger percenr if income for lower earners. This also means that if you reach the maximum income for ~17 years, then further zeros just dont have that great of an impact on your final benefit.
I think a part 2 of this video is warranted purely on bend point math.
Wow that working-for-credit approach makes the US social security system sound like some kind of play-to-earn crypto app. Had no idea it worked on a cumulative basis. So interesting.
A good video. But, high earners are used to a life style that has higher income so the target retirement income will be higher as well to allow for travel and such.
If a person gets the maximum benefit, but also gets hit with the maximum reduction due to the govt pension offset ($547ish I think) would their spouse receive half of the original amount or the adjusted amount?
I did not hit the max social security tax until I was 36. I'm like you I would rather not count on it and have it as a bonus than not save enough and something happens to it (most likely won't but you never know). I would rather retire in 24 years at 62 with more than enough than have to work until 70 (although a part time job at the local gun shop wouldn't be a bad thing in early retirement).
Social Security is unfortunately what the majority of the country depends on. That’s why it’s the third rail of politics and nobody wants to fix it.
Not until I retired did I realize that financial goals flip-flop. Since Erin is working, she is planning to not receive Social Security. Since I'm retired, I plan to live entirely off of Social Security!
P.S. Erin, I hit the like button, as always. I'm finally in the top 3% of something!
Is the 50% spousal benefit only for spouses who didn't work? If me and my wife worked for 35+ years and started claiming at full retirement age, would each be entitled to 100% of our own benefit and an additional 50% of theirs?
No
Social security will be there for sure; either 1. We will pay more SS tax or 2. We will receive a bit less (reduced payment or delayed start age), or a combination of both. I'm currently estimating I"ll be receiving 50% of current benefits and take anything extra as a bonus
They also might start taxing even more of the benefit for those with other sources of income.
Actually, we need to allow SS to be able to invest in S&P and not confined to only bonds and treasury.
Just invest your money in an S&P 500 index fund and be a multi millionaire. Then who cares if SS exists or not.
@@richardli5530we need to allow people to opt out.
My plan disregards social security and my pension. If I get the full amounts in both, those will make up a significant portion of my 4% withdrawal equivalent, so I can lean heavy into stocks and not have to worry about the rebalancing nonsense.
Worth noting you basically need. to be in the top 10% of income earners to max social security
So I would have thought one would need to have been earning close to the maximum taxable amount for all or most of those 35 years in order to be getting the max benefit. But I certainly haven't, and my current projected monthly benefit is only about $100-$200 below the max. Does that mean people who did earn and thus pay in the maximum for 35 years paid in far more than I have for only a relatively small additional benefit? I'd say I was well below the maximum for about the first 1/3 of my career, somewhat below for the middle third, and came close or hit the max for the most recent third.
Several of my coworkers went overseas and married a much younger wife with kids. Not only does the government provide monthly money for the step kids because they are under 18, but the spouse will also get spousal Social Security money. The math just doesn't make sense how the system can afford to handle paying out to people who never paid in their fair share. Am I correct?
There is no fair share, the entire thing is flaky.
Which income do I need to opt out of social security all together.
Get a local government job. I never had to pay social security and retired at 43 and my pension is 12k a month. They can keep social security.
I can remember when I started working the maximum taxable amount was about $80,000. My goal was always to earn the maximum. I’m now 50 and it probably isn’t going to happen.
If were high earners( 1st time in 2023) does the tax accountant figure out the no ss tax part or is automatically figured in?
Your company’s payroll system does it automatically. (They don’t pay their share above that mark either.)
@@shawnbrennan7526 thank you but what if income is coming from multiple jobs?
@@hownwen
We may be beyond my level of expertise here, but I THINK this way it works is:
Each payroll office will run calculations based on your W-4, so if you are working two jobs but haven’t made that clear it is possible to overpay your SS taxes.
If so, you should be able to get that back as part of filing your tax return.
(I’ll go on TaxSlayer later and plug in some fake numbers to see if I can get it to generate a SS rebate.)
Your tax person will take care of this. It basically works like over-withholding of fed income tax, if you overpaid, you will get a refund. Which is an OK problem, maybe a bit of lost interest income, but not the end of the world by a long shot.
I can see how this video can bring a LOT of anxiety to adults.
Yup. Basically if you are rich you all good but the lower income the more screwed
I will be getting near the maximum. It does not make a big difference once your average monthly earnings exceed $7078. That would be the ideal minimum to shoot for if possible. Average earnings above 7078/mo only grow the benefit by 15% so early retirement is not all that costly if your 35 year indexed average remains above $7078/mo.
Sucks to learn about the 35-year-of-work rule, but honestly, my retirement isn’t even accounting for any SS at all. I’m 24, but I only plan on working for another 17 years before retiring. At that point, I’ll hopefully have more than enough to last me indefinitely just off my investment interests alone
Erin I believe by the time you are eligible for social security the law will be dramatically different.
We looked it up a week or so ago. Without realizing it I hit the maximum income 13 times over my 35 year work history. It wasn't until the last few years that I even realized there was a cap.
That’s why your net pay goes up in December, or whenever you hit the cap for the year.
@@shawnbrennan7526 I never paid any attention to it. That is why my wife handles the finances now.
Don't you mean June? 😉
@@taliesin1977 I interpreted that as the generic end of the year. At some point, depending on what you real salary is you hit the cap and your net goes up. It isn't controlled by anything other than your salary and the cap for the given year.
The biggest issue with Social Security is there are too much being paid out and not enough being paid in. Dave Ramsey makes fun of "Social End Security" and how it will eventually be absolved if the country continues to make no changes to how Social Security is operated. In short, it is best to plan for retirement without including Social Security. To let Social Security be the cherry when planning for retirement.
i'm trying my best to not even have to rely on SS, doesn't even enter into the equation, who knows what they will do with it.... i'll be half surprised if they even give it to me when i retire, 34 trillion in debt, what do you think is going to happen with that??
Base or TC?
I am just assuming SS will be cut to almost nothing or gone by the time I'm ready to retire. I have no intention of depending on it. I understand that not everyone will be able to do that, and if I'm unlucky I won't either, but I am going to try. If it's still there when I retire I'll consider it a bonus.
And every year we wait for those last few checks with OASDI of $0.00 taken out.....and it shows up in the earner;s account.
Well I would say income beyond that threshold is not subject to social security tax so it's even better. Earning right at the threshold is probably the worst situation because you contribute the most into the social security but the return percentage is the worst
Why do I feel like it was easy to hit the max benefit number with a middle of the line job (engineer or salesman) 30-40 years ago but today it's not even close to being achievable. I think my dad maxed it out every year, but me having a similar job title as what he started at is roughly at half of these numbers.
Wages haven't kept up with inflation and SS has.
yeah im 25 i doubt Social Security gonna be around when im even close to that age so I dont count on it as is.
It would be nice to see how much better off a person would be in retirement if they could opt out of SS and invest that same 6.2% during their working years with a rate of return tracking the S&P 500.
Key word being, 'if'
Can you clarify one thing? 168k for all 35 years? Or just one year hitting that number?
You would have to hit the max income at all 35 years, it’s indexed for inflation, so next year that number will be higher.
@@ErinTalksMoney pretty new info for me. Thanks for the video. Appreciate it
Very informative, even though I don't think my generation will have the younger population to even support the Social Security program and probably won't get any money from it. Still informative
Note how close this number is to the $173k/year that Vanguard says your income needs to be in order to retire comfortably (the subject of Erin's earlier video). Vanguard's report also figures social security into the result, by the way, which may be why the two figures are close. That is just the reality today, my friends. No fear-mongering here, just the reality due to inflation and rising costs of everything. 20 years ago, that figure would be halved. In 2004, I earned about $60k, when the ideal income was $88k (0:25) according to SS. Now it's doubled, and 88k becomes 169k. Most people would need that kind of income to retire "comfortably," which is the keyword here -- meaning having a big enough nest egg so you won't overspend your returns every year.
What about if they change the 40 credits to 45 and 10 years to 15?
Well, honestly it wouldn't be too hard to earn extra credits. About $7000 per year for 4 credits. Work full time in Nov, Dec at $3500 per month, then Jan and Feb to max the next year. Repeat every 2 years
I’m so math and numbers minded that when you said “that might sound like an *odd* number”. I couldn’t bc it’s an even number lol 😂. It would be a random number. Or at least how I’d be inclined to say that lol
😂
when is the last year that the wages count toward your 35 years? 67 or 70 or something else?
They’ll count ANY years before you start COLLECTING.
It seems like most people our age (I’m 40) don’t even count SS in retirement. I even went to a financial planner and they acted like I shouldn’t count on it. What are your thoughts? I certainly want to get them haha
I'm ~40 as well and definitely expect social security to be available, despite decades of doom and gloom from people stating it won't be available. I think as "worst" case scenario - it will be phased out or reduced at a certain point, but the value you've accrued through that phaseout begin date should be fully available. After all, SS is your money you earned.
I’m not far behind, late 30s. Here’s my two cents as someone who simply loves reading about personal finance and talking about it. I think the payouts will decline and perhaps start at later ages - I also think they will raise the income limit where it is subject to SS tax.
@@ErinTalksMoneyLower income people will never have their benefits cut. Higher income folks will likely pay more or receive less. Too many older retirees live only on social security and have little or no other income. My father-in-law gets social security and a pension, but lives with us because he can’t afford to live on his own.
SS payments will continue, but inflation will destroy the value.
Even though I’ve never made that threshold number SSA says my benefit is very close to the maximum.
Assuming the government doesn't bankrupt or steal it before you retire. I'm mid 40's and I'd be shocked if I ever received any SS benefits when I retire.
9:45 Yes… must… reach.. 850!!
Is the $168k number affected by untaxed 401k contributions?
Ie, if you make 168k and contribute $20k to 401k is your SSA income 148k?
Social security income is not affected by elective deferrals like 401k contributions
Erin I just called my Senator’s and Congress men and told them to raise the cap to total income not the $ 168,000. People earning less fine it more of a hardship than Bill Gates ! Just my 2 cents
I actually agree with that! I talk about that in the video I release today regarding the 401k 😊
SS is on the way to insolvency. To 'fix' it there will need to be significant changes that diminish the benefits for some or all. The easiest targets will people that don't need it. So prepare to be punished for saving responsibly.
I agree! I envision SS benefits being “means tested” in the future with a set net worth as being the determining factor as to whether you get SS benefits or not. Us responsible savers will be punished for having lived within our means. I am getting punished right now by having to pay a ridiculously high Medicare premium due to my high income before retirement. I applied for relief, but this won’t kick in until next year. They always get their pound of flesh. My daughter’s mother-in-law, who never saved a cent towards retirement, gets both Medicare and Medicaid and doesn’t have to pay one cent for anything medical.