. It may not occur to you to consider your Social Security earnings records as a snapshot of your financial history, but looking at my own records sure reveals a lot about where I stood at various times during the past 37 years, or all of my working life.
It also goes to show that you don't need to have a high income to retire comfortably.
Below is a list of my gross income for each year since I started working part-time at a local insurance agency in high school.
You might say my income, for a college-educated woman who has always lived in the Northeast, has tended to be on the low side, with less than $2,000 earned in high school and college to a high in one singular year (1999) of $128,000. But if you exclude p/t student jobs and the one year I lucked out with the sale of some stock options in 1999, you'll see my income ranged from a low of about $4,000 to $7,500 in the first few years after college (when I somehow survived on that income as a newspaper reporter) to a high in 1998 when I grossed $71,464 writing for a mutual fund and annuity marketing company.
(I guess you should keep in mind that my actual earnings were probably at least 15% higher than shown here since in most years I maxed out my 401k contributions, which reduced my taxable earnings. I also mostly contributed to a traditional IRA.)
If you exclude my school years and the stock option year in 1999, my average income over the course of 30 years was just $37,742! That number is low on account of the 5-year period of underemployment I just went through from 2009-2013, plus another yearlong period of unemployment in 1992 during another recessionary period.
If you add back in an average 15% that I faithfully contributed to traditional IRAs and 401ks most years...though there were some years i contributed after tax monies to a Roth, and there were some age 50+ catch-up contributions I made....my average annual earnings is still a low $43,403.
Pretty amazing, isn't it? And still, I've done pretty well for myself.
The Social Security Administration tells me if I begin collecting benefits at the minimum age, 62, I'll get $1,432 a month; if I wait til age 66 and 10 months ("full retirement age"), I'll earn $2,033 a month. If I could somehow wait til age 70, I'd get the maximum benefit of $2,549.
I base all my retirement calculations on the age 62 benefit amount, but in truth I plan to try to wait til age 66 and 10 months to begin collecting. I don't see the point in holding out til age 70, an age when I might be too old to really enjoy the extra income.
I know the SSA calculates benefits based on the 35 highest income years of your work history. I now have 37 years of earned income, but since as you can see from the chart below, I had so many LOW income years of under $1,000, I'm eager to start adding some much higher earning years now with my new job so these new years are added into the 35-year average, effectively bumping out those lowest earning work years of 1976, 1977, 1978, 1981 and 1992, which are pulling down my average considerably. So I hope to boost those 3 magic numbers, quoted above, about what I could to expect from the SSA at age 62, 66/10 months and age 70.
How about you? Have you ever studied your SS earnings records to see what you could glean from it?
2014 $80,000, new job at bank!!
2013 $32,923 Got the bank job as a contractor in Oct.
2012 $13,992 Under employed freelancer
2011 $11,550 Under employed freelancer
2010 $30,575 Under employed freelancer
2009 $66,445 Laid off in September...uh oh
2008 $67,766
2007 $60,847 Layoff, then new job as a website writer
2006 $54,059
2005 $56,019
2004 $43,173 New job at a PR agency for the next 3.5 yrs
2003 $26,831
2002 $37,941 Consulting
2001 $64,688 New job in financial services start-up but laid off after it goes under
2000 $53,517 New job in financial services followed by layoff 9 mths later shortly after 9/11
1999 $128,835
1998 $71,464
1997 $65,132
1996 $55,042
1995 $50,707
1994 $46,118
1993 $49,182 Financial services job that lasted til 1999
1992 $1,109 Unemployed
1991 $40,160 Crime bureau job, then layoff after company goes thru merger and relocation
1990 $29,397 Crime bureau job
1989 $20,794 Real estate copywriting
1988 $22,561 Low-paying non-profit job
1987 $20,395 Undiagnosed MS symptoms; moved to CT
1986 $16,076 News reporter in VT
1985 $4,008 Law school dropout
1984 $7,030 Entered law school in MA
1983 $9,296 News reporter in MA
1982 $7,499 News reporter in MA
1981 $401 College
1980 $1,518 College
1979 $1,420 College
1978 $911 College
1977 $726 High school
1976 $740 High school
Laying bare my lifetime earnings for all to see
September 12th, 2014 at 05:57 pm
September 12th, 2014 at 06:18 pm 1410542293
September 12th, 2014 at 06:33 pm 1410543193
My Social Security earnings report looks like a "no visible means of support" report. A lot of years of full time volunteer work, years that practically don't exist on paper (raising a child and only worked here & there), the part time contract work, and the ghost years in college of only having been able to find student work-study jobs on which no Social Security taxes were paid. To top it off, since I will inherit my husband's public employee pension should he die, my SS pension will be reduced by 1/3 to 2/3-- to perhaps just less than enough to buy an economy car's tank of gasoline per month.
September 12th, 2014 at 08:21 pm 1410549710
September 13th, 2014 at 12:37 am 1410565024
September 13th, 2014 at 02:41 am 1410572473
There was a thread over in the SA forums that referenced lifetime earnings and I mentioned that I used the "Taxed Medicare Earnings" column on DH & my SS Statements to add up lifetime earnings (except I had to estimate DH's pre-marriage when he lived outside the USA). Funny that most of the other posters mentioned just having to make a rough estimate of their earnings ... even after I mentioned what I used.
401K contributions don't affect your SS or Medicare tax, only income tax. (That's why on your W-2 the "Wages" amount in Box 1 is lower that the Box 2 (SS Wages) and Box 3 (Medicare Wages). Only Box 1 is reduced by 401K contributions. So the "Taxed Medicare Earnings" column is a great one to show earned income. (It may miss little things like jury duty pay or survey rewards.) For me personally, my SS Earnings & Medicare earnings have always been the same but DH has had several years where Medicare Earnings were higher.
September 13th, 2014 at 02:44 am 1410572659
September 13th, 2014 at 10:08 pm 1410642530
September 14th, 2014 at 12:13 am 1410650001
September 15th, 2014 at 06:56 pm 1410803781
October 12th, 2014 at 08:51 pm 1413143471