Dear Liz: All of the Social Security calculators that I have found assume that you will work until you start drawing Social Security benefits. However, I plan on retiring around 62 but not drawing my benefits until age 66 or later. Whenever I calculate my future benefits, the calculator assumes that I will continue to draw the same salary as I have today until I start benefits. I’m worried the calculators are overestimating my benefit.
Answer: As you probably know, Social Security uses your 35 highest-earning years to calculate your benefit. When you work longer than 35 years, you’re typically replacing your lower-earning years in your teens or 20s with higher earnings from your 50s and 60s.
Free Social Security calculators usually assume that pattern will continue. If you stop working or earn less, the calculators may overstate your benefits. To get a better estimate, you’ll need to shell out $40 to use MaximizeMySocialSecurity.com, which allows you to customize your future earnings assumptions.
Can’t this reader use the Social Security calculator to calculate his or her benefits upon retirement at 62, then calculate the change in benefit due to delaying collecting benefits using the 8% per year increase due to delaying?
The 8% delayed retirement credit isn’t the issue. The issue is how the calculators are estimating the base benefit (also called the primary insurance amount) on which the delayed retirement credit would be applied. Most calculators assume you’ll continue to earn about what you do now. Since SS calculates benefits based on the 35 highest-earning years, each year the calculators assume one of your low-earning years would be replaced with a higher-earning year. If your earnings are in fact lower or zero, the calculators will overestimate your base benefit.