Why high income 40 year old retirees still get crazy big Social Security checks at age 62

Conventional wisdom says, "If you retire at a young age, you'll get very little from Social Security". The arithmetic reveals a very different result.

If you are a high income worker paying maximum FICA, you lose very little in SS benefits by retiring early. It all comes down to the bend points. For someone with 35 years of max FICA wages retiring at age 62, about half of your Average Indexed Monthly Earnings (AIME) of $12,427 is above the 2nd bend point of $6,721 where you only get a 15% credit for your contributions. If you retired at age 45 or 46 and happened to keep your AIME right at the 2nd bend point, your $2,572 maximum monthly benefit at age 62 would only be reduced by about $600/month. You would be getting 77% of the maximum benefit while paying about half the FICA taxes. I quit my engineering job way back in 1994 at age 38 once I had accumulated enough capital to live off the '4% rule' for retirement withdrawals. I am astonished at how large my SS check will be in 3 years when I start my benefits at age 70, even though I have paid very little in FICA over the past 29 years.

Resources for more information

How much do you really need to retire?, Quora.com post from w.w. Lenzo Ph.D Quantum Physics, Stanford University 1990

Life Expectancy vs. Income in the United States -- Opportunity Insights Harvard University

PortfolioCharts.com - site that shows lowest cost ETF/mutual fund choices for a retirement portfolio

Bengen, William P, Determining Withdrawal Rates Using Historical Data, Journal of Financial Planning, October 1994, pp 171-180, Volume 7, Number 4.

Investment Company Factbook 2019, ICI.org

You�ll Spend Less As You Age -- Time Magazine, Feb 26, 2014

Excel Spreadsheet Social Security Calculator from Neurosphere -- an excellent tool from a long time Bogleheads contributor.