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How Years Out of the Workforce Impact Benefits
Future retirees who, for one reason or another, have stepped away from the taxpaying workforce for extended periods need to be aware of the process for calculating their eventual Social Security benefits. Although often viewed as a bit arcane, this calculation has some straightforward aspects, one of which is the number of years of earnings that factor into the determination of benefit amounts. It’s this aspect that draws attention to any years in which the future beneficiary recorded no taxable earnings and therefore made no Social Security tax contributions.
Investopedia’s Sabrina Karl, in a post on their website, explains this mathematical process in greater detail, explaining how gaps in a future retiree’s earnings record impact future benefits. Her post underscores the importance of routinely checking the statistics maintained by the Social Security Administration — the records used to calculate benefits — to be aware of zero-earnings years, and offers thoughts on adjusting retirement plans to address this impact on benefits. Check her post out here.