I should have said "if your not working". This was implied by the OP.
Your example of an $80K income at age 40 and a $95K income at age 75 is not correct. The income at age 40 will be adjusted (indexed) to current dollars and will exceed a value of $95K (this year) for choosing the high 35 years. Specifically, the index factor would be 3.23 so $80K at age 40 is worth $258K today. This exceeds $95K this year.
Quote:
Originally Posted by Heyitsrick
You're correct not to wait past the age of 70, but not quite correct in saying your benefits won't (potentially) increase.
Social Security allows you to start collecting at age 62. For each year up until age 70 that you delay starting your SS collecting, they will bump up your SS yearly income stream by ~8%. SS does not bump up the stream for those who have delayed starting SS collection anytime after age 70. So it makes no sense at all not to start collecting at age 70 if you are purposely delaying. You will lose money if you delay collecting past the age of 70.
However, no matter when you start collecting, the 35-year rule of highest wages still applies when calculating what SS will pay you. *** So, say you're 75 and are still working a job that's paying you a good income. You're already collecting SS at this time. Chances are that your job/employment income at 75 may be higher than your income at, say, 40 years old. If that's true, your income at 75 will displace the lower income year you had at age 40, and your SS benefits will be recalculated based upon that amount - your highest 35 years of income. Make sense?
Example: Say your income at age 40 was one of the years SS used to calculate your SS benefit when you started collecting, as it was one of your 35 highest income years. Say you made an income of $80K at age 40. Now, you're still chugging along at age 75 working full time, and your salary at age 75 is $95K. SS will use that $95K number to take the place of your $80K salary you had at age 40, and will recalculate what they pay you monthly.
(*** If you collect SS earlier than your full retirement age and continue to work, you may be penalized on what SS will pay you based upon your salary.
Additionally, SS increases payments based upon the Cost of Living Adjustment (COLA). I'm not referring to that in this post.)
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