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URL:  http://boards.fool.com/jafo31-writes-paying-maximum-fica-for-more-than-30499722.aspx

Subject:  Re: Retirement savings benchmark Date:  1/22/2013  3:59 PM
Author:  intercst Number:  71298 of 75637

JAFO31 writes,

Paying maximum FICA for more than 35 years does not increase SS benefits.

That's true. The other interesting thing about Social Security is that a Maximum FICA worker gets very little credit for about the last half of his earnings and FICA taxes paid.

http://retireearlyhomepage.com/betterdeal.html

There are two bend points in the Social Security formula for calculating your monthly benefit. For 2012, you get a 90% credit for your first $749 in average indexed monthly earnings (AIME) subject to FICA, a 32% credit for AIME between $749 and $4,517 per month, and a 15% credit for everything over $4,517. Someone who paid the maximum FICA tax for the past 35 years and retired in 2012 at age 62 would have average indexed monthly earnings of a bit more than $8,000. To keep your benefit within the second bend point where you get a 32% credit on your earnings, your FICA wages would have to average about 57% of the maximum FICA wage over the past 35 years. To stay within the first bend point where you get a 90% credit, you'd have to earn less than 10% of the maximum FICA wage over 35 years -- a near-poverty level wage.

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intercst
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