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URL:  http://boards.fool.com/intercst-jafo31-writes-ltltltpaying-30499954.aspx

Subject:  Re: Retirement savings benchmark Date:  1/22/2013  5:28 PM
Author:  JAFO31 Number:  71299 of 78168

intercst:

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.

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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."


Thanks. I was aware of the inflcation points, from prior reserach but not current AIME amounts because they are indexed and I had not looked at the numbers for several (or more) years.

Social Security is expected to replace about 40 percent of pre-retirement earnings of average earners; 80 percent for the lowest earners; and 27 percent for those at the maximum taxable wage base of $80,400 [2001], according to the Social Security Administration.