From 24/7 Wall St. · Gerelyn Terzo · · 1m 10s
Social Security Values Old Salary More Than New Job
A machinist's $70,000 2001 salary may count for more than his $122,000 aerospace job under Social Security rules.
In brief
A machinist's $70,000 2001 salary may count for more than his $122,000 aerospace job under Social Security rules. Social Security could value a 2001 salary of $70,000 as $135,600 instead of a current $122,000 aerospace job. Originally reported by 24/7 Wall St..
Social Security Rules
Social Security does not reward the biggest recent paycheck but values older earnings for benefits.
Old Salary Value
A 2001 salary of $70,000 adjusts to $135,600 under Social Security's wage indexing system.
New Job Impact
His $122,000 aerospace job still trails the indexed 2001 year by $13,600 in Social Security calculations.
Indexing Process
Social Security uses the national average wage index to adjust older earnings to the wage level in the year you turned 60.
Benefit Formula
Social Security calculates benefits from the highest 35 years of indexed earnings with a monthly average formula.
Timing Matters
Earnings from age 60 forward count at face value while indexed earnings from earlier years can outweigh recent salaries.
What Happens Next
Check your earnings history to see if the new job increases Social Security benefits or just your savings.
At a glance
Social Security could value a 2001 salary of $70,000 as $135,600 instead of a current $122,000 aerospace job.
