Chris Stein, CFP®
Estimating A Future Social Security Benefit
A reader from Connecticut asks how to get a more accurate estimate of his future Social Security benefit.
"I am hoping you can guide me on a Social Security question. My wife and I are in our late 50s, and I have recently retired. I am trying to understand how to get a more accurate estimate of my Social Security benefit when I become eligible. Social Security's projections assume that I will continue earning what I earned last year until I am eligible for retirement benefits. I know that will not be the case since I recently retired. Is there a calculator someplace where I can change that assumption to stop incorporating future earnings and just halt it where it sits now (meaning no future earnings)?"
You are correct. The Social Security Statement you might get in the mail or look at in your online Social Security account provides your personalized retirement benefit estimates. But the estimates they give you for age 62, your full retirement age and age 70 all assume you work right up until you claim, earning what you earned last year, which isn't always the case.
If you're fairly close to claiming – or even fairly close to age 62 – the benefit estimate isn't going to be skewed much for most people. So even if you say, "Oh, I'm not going to work for another seven or eight years," it may seem like a big difference from the Social Security assumption. Still, it usually doesn't change the benefit estimate noticeably.
But the younger you are – say you're retiring in your early or mid-50s – the benefit estimate could be off by a fair amount.
Also, you could see a more significant difference depending on your actual earnings record. That is, what is sitting in those top 35 years right now versus what might go in as replacements if you continued to work?
What's shocking is how difficult it is to find a calculator that allows you to make these adjustments. Social Security does offer a more advanced calculator, but I find it extremely difficult for people to use – and even difficult to find on its website.
I always look for a free solution to a problem first, but I haven't found a good free one here. So, I recommend that you go to the website for the program we use from the advisor side to do Social Security benefit estimates for our clients. There is a retail version where you can buy access for a year for $40. The software is called Maximize My Social Security (https://maximizemysocialsecurity.com/).
The website was started by Professor Laurence Kotlikoff, a professor of economics at Boston University who has a passion for all things related to Social Security. We find that tool to be able to handle practically any situation. For example, it gives you the full ability to enter a future earnings record assumption rather than use Social Security's default assumption.
The tool does cost $40, but it gives you access to a full year to go in and play around with different assumptions and run estimates for different ages and other factors. Other paid services will probably do the same thing, but I know this one will do what you are asking. It gives you the same capability on the retail side as on the professional side.
If you're that interested, it's probably worth $40 to play around with it. And, considering you'll be pulling your hair out if you try to use the free Social Security tool, it could be a small price to pay to keep your hair.
As an aside, we know other financial advisors follow our shows and blogs, so we'd like to comment on the reports produced by Maximize My Social Security. They are not at all attractive and aren't useful for presentation purposes. But the software can model almost anything. We use it for its exceptional ability to crunch Social Security numbers, and very rarely have we found a scenario it cannot handle. As I remember, we contacted the company once about a case where disability or survivor benefits transitioned over to another type of benefit, and they agreed it couldn't be done. But for 99.99% of the cases, their system works perfectly.
There used to be many more such programs available in our industry. But, ever since 2015, when the laws changed, you don't hear much about them. When strategies such as "file-and-suspend" and "claim-now-claim-more-later" were still permitted, that type of software came in very handy.