Do periods of unemployment count as zeroes when it comes to how Social Security is calculated?
Unfortunately during the recession I have been laid off multiple times. I have noticed that unemployment counts as 'income' when it comes to calculating things like Obamacare health subsidies. Plus I have to pay taxes on Social Security as the government is acting like it's income, so that means it should count as 'income' instead of years with zeroes when it comes to Social Security, right??
Social Security is based on highest earnings for 35 years. | 04.26.16 @ 19:34
I already knew that the SS formula is based on 35 years, but what counts as earnings? As I mentioned I am taxed on unemployent so that is income....how are earnings defined?
| 04.26.16 @ 22:53
Social Security does not count unemployment benefits as earnings. They do not affect retirement benefits. Also, income from Social Security may reduce your unemployment compensation.
How SS is calculated:
1) Your previous earnings are restated in terms of today's wages to reflect wage growth.
2) Earnings for the highest 35 years are averaged and divided by the number of months in 35 years to arrive at Average Indexed Monthly Earnings (AIME).
3) Social Security benefit formula is applied to AIME to produce the Primary Insurance Amount (PIA), the benefit payable at the Full Retirement Age (FRA).
Here is a link for more information:
There are many misconceptions about taxes. Should we pay them? If we pay nothing, are we entitled to benefit from others' tax payments? An effective solution requires careful consideration from all sides. In my opinion, at no age should anyone be told they must spend more than they make or succumb to a secular culture of entitlements via wealth redistribution.
As always, feel free to contact us directly to discuss your situation in greater detail. No obligation. Our focus is to get you where you need to be financially. So, you can enjoy your lifestyle without these distractions.
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| 04.26.16 @ 23:08