Social Security Tools – How much will you get?
Recently I’ve been actively exploring what it would take for my wife and me to retire early. On paper we’re minimally financially independent. By that I mean if we had to stop working we’d be OK. The kids would have food, clothes, and educations. The Mrs. and I would have the basics as well. For me though having just enough isn’t enough. We have a couple of expensive hobbies and we don’t want to spend a long retirement subsisting. We want to have fun and in some cases fun requires money. So we have to balance current fun vs. delayed fun. In this case I’m very much like someone retiring from the military. In fact, some of my former squad mates are retiring this year.
One of the pillars of retirement is Social Security. There are a lot of unknowns here. Yes, long-term the “trust fund” is low on
cash government funny money credit. This may result in a lowering of benefits, but there is too much political inertia behind the program for it to go away entirely. We can’t really account for every possibility except to build in some extra savings. Regardless, it’s helpful to know how much your estimated benefit will be. The first step is to go to the Social Security website and register. From there you will have access to your estimated benefits and earnings records.
The website is quite easy to use, but I found it lacking. It’s great to have estimated benefits, but their calculations assume that you’re going to continue making the same salary through at least your early retirement age. In my case that is 62. 62 isn’t going to work for me – see above where I talk about retiring early and having fun. I wanted to know how much I could anticipate receiving if I quit working at say 52. So I went digging into the calculations…and my eyes started bleeding. It’s entirely possible to do this in Excel. The formulas aren’t that hard, but it’s a lot of data and a few steps. I figured someone had already done it, and after a little more digging I found a good one.
So here’s the point of this post – Social Security Tools. You copy your earnings record from the SSA website and paste it into a box on Social Security Tools, add your birthdate, and boom it calculates your expected benefits. You can adjust for number of years you expect to work as well as expected salary. So unlike the SSA site, you can figure out your expected benefit if you just quit working tomorrow.
As I said the calculation is a bit involved. But there are a few interesting things we can discover by taking a closer look. First, the formula considers the highest 35 years of earnings. If you haven’t worked for 35 years, the remaining years are considered zero. So if you are retiring after 20 years in the military and you didn’t work a lot before joining, it may be worthwhile to work a few years even at a lower salary to kick out a few of those zeros and increase the benefit. Also there are a couple of “bends” in the graph. After a certain point (total dollars earned) historical earnings lose a lot of their impact.
The bottom line – in my case, in six years when I turn 52 each additional year of work gives me about $500/yr in Social Security benefits. In other words, in addition to a loss in salary and benefits, I would be out $1.50 a day in retirement (after 62/65/70 depending on when I start collecting) for each year of fun. Fun wins!
This is just one small piece of the whole early retirement decision, but Social Security Tools is an easy and fun way to explore your options.
A note on security: According to the developer and my brief review of the website code, Social Security Tools doesn’t move any data off of your computer. All of the calculations are performed locally. It’s always possible that there’s something sneaky going on, but I consider it safe enough for my data.