Good afternoon Richard,
In follow up, I want to explain how it can be that you are earning so much more this year and yet it will have such a minimal effect on your benefits.
The determination of how much a person’s social security retirement benefit will be involves some complex calculations, and contrary to what might be expected, the benefit is not evenly awarded based on your lifetime income, but instead is heavily weighted on the first $322,140 that you earn in your life.
Your social security retirement benefit is based on an average of your earnings over the highest 35 years of your lifetime. If you earn income in less than 35 years, that income is still divided based on the 35 year factor.
To complicate things even more, social security then applies a multiplying factor to each year of income to try and make it relevant to today’s dollar value. In other words, earning $10,000 in 1960 is the equivalent of earning $107,300 in 2013. Here is a table that you can actually use to determine the adjusted average monthly income that social security will use to determine your benefit amount: http://www.socialsecurity.gov/pubs/EN-05-10070.pdf
Once all of your adjusted monthly income (top 35 years at most) is determined and then added up, social security will divide that amount by 35 (years), and then again by 12 (months), to get an average monthly income for you. It is from that average monthly income that your benefit is determined.
Based on your average monthly income, social security will pay as your retirement benefit at full retirement age 90% of the first $767, 32% of the remainder up to $4,624 a month. Then finally, if your monthly income average is greater than $4,624, they will add 15% of all amounts over that.
As is plainly clear, while social security will pay 90% of the first $767 of your average monthly income as a benefit to you, that percentage drops drastically to only 32% after the first $767 of average income.
What this means to the typical employee who has already worked close to, or more than, 35 years, is that working another final year before taking their retirement benefit will generally, at most, increase their total retirement benefit by only about 1% to 2%.
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Have a great day,