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BusinessColumnistsCarrie Mason-Draffen

The lowdown on calculating your Social Security benefit

Social Security retirement benefits are based partly on

Social Security retirement benefits are based partly on the worker's applicable earnings from 1951 to their retirement, updated to reflect increases in average wages. Photo Credit: Getty Images/iStockphoto / zimmytws

DEAR CARRIE: I plan to wait to apply for Social Security benefits until age 67 in order to qualify for my full benefit. But I don’t plan to stay in New York, which means I will probably work for a lot less money once I move, or maybe not work at all. How will Social Security figure out my monthly benefit when I retire? — Looking Ahead

LOOKING AHEAD: In the broadest terms, Social Security retirement benefits are based on workers’ taxable earnings averaged over the number of years they worked, said Linda Lauria, a spokeswoman in the Social Security Administration’s New York regional office in Manhattan.

From there, several key steps are taken to arrive at a monthly benefit.

First, to figure out a retirement benefit, the agency will consider all of a worker’s Social Security-covered earnings from 1951 through the year before his or her retirement.

As part of that, the person’s earnings through his or her age of 59 are indexed, that is they are updated to account for increases in average wages, Lauria said.

“In other words, indexing is assigning today’s value to wages earned in the past,” she said. “We use the indexed earnings, not the actual earnings, to figure the retirement benefit.”

Once a worker turns 60, his or her earnings are not indexed but taken at “face value,” Lauria said.

“It doesn’t matter if the person is still working or is retired,” she said.

The numbers used to index the earnings are based on national average earnings and vary with a person’s age.

Lastly, after those computations, a worker’s 35-highest years of earnings will be used to calculate his or her monthly benefit, Lauria said. The 35-year computations are used for people born in 1929 or later, Lauria said.

DEAR CARRIE: I work in an office with a handful of employees. Everyone was made a per-diem employee, and we lost our paid time off. So the two weeks of paid vacation we used to receive are gone. The sick days were also taken way. Now if we take off for any reason, we don’t get paid. It this legal? — PTO No Go

DEAR PTO: It’s legal as long as you received all the paid time off you accrued before the policy was changed. Companies don’t have to offer such benefits, but when they do they must honor whatever the employees accumulated before a paid-time-off policy changed.

Also, if you are an hourly employee, your employer has to pay you only for the hours you work. So even if the office closes because of bad weather, your boss would not have to pay you for that day.

DEAR CARRIE: I am an hourly worker in a day care. We are required to begin working five minutes before our regular starting time. We are not paid for that extra time even though it adds up to 25 extra minutes a week. Is this legal? — Doing the Math

DEAR MATH: If you are an hourly worker, you have to be paid for all the time you work. It’s just that simple. And if those 25 minutes put you over the 40-hour mark for the week, you would be entitled to overtime also. For more information call the U.S. Labor Department at 516-338-1890 or 212-264-8185.

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