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Social Security earnings and a question

January 28th, 2018 at 05:04 pm

I was looking over my reported Social Security earnings today and noticed they only counted 1 of the 2 contract jobs I had in 2017. I'm guessing it's simply a matter of their not having received the earnings report from my current employer, but I'm going to call the Social Security Administration tomorrow anyway.

Higher reported earnings help boost your Social Security benefits in retirement. (Note that they do not count unemployment benefits for purposes of calculating your retirement benefits.)

The SSA calculates your benefit based on the average of your top 35 years' worth of earnings, so I've been aware that retiring early could negatively impact my 35-year average.

I'm happy to see that with each passing year of work, I've been able to eliminate some very low-earning years from the 35-year group. This includes my later high school years and college years when I worked part time, making at most $1,500 in a given year.

Currently, 7 of my lowest earning years are not being counted, and I can see that my overall average will gradually become higher the longer I work; I still have a total of 4 years in my work history (all in my 20s) when I made less than $10,000.

For example, the next lowest low-earning year I'd like to eliminate (at the end of 2018) will be 1985, a year when I entered law school and earned just $4,008.

So here's a worst case scenario type of question: Let's say my current employer doesn't want to let me work p/t. I leave that position but can't find another W2 employer in 2018. I convert $20K worth of traditional IRAs into Roth IRAs and pay the taxes due, mainly to ensure I remain eligible for ACA health insurance (not Medicaid).

I'm guessing SSA would not consider the $20K as earned income, to be used in their benefit calculations? Or would it?

6 Responses to “Social Security earnings and a question”

  1. Kymberlee Fisher Says:


  2. AnotherReader Says:

    Only earned income up to the Social Security tax limit counts.

    It's really interesting to make a spreadsheet with all 35 highest years income. If you multiply each year by the National Wage index factor that Social Security uses for their calculations, you can see how much each year is actually weighted. You can then do the calculation to see what your FRA payment would be.

    Indexing stops when you reach 60, so any earnings after that year will not be indexed.

  3. creditcardfree Says:

    True...only earned income counts towards social security.

  4. frugaltexan75 Says:

    Interesting - I didn't know that's how they calculate it. I have about 5 years I'd like to take out of the equation ... but does that mean I'd have to work 40 years?

  5. PatientSaver Says:

    I believe so, FrugalTexan. For each additional year of decent income, you'd swap it out for one of your low-earning years.

  6. frugaltexan75 Says:

    Ah well, I'll probably need to go that long anyway.

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