Chapters

00:00 Introduction to Analyzing How Working One More Year Impacts future PERS and Social Security Retireme

00:38 Foundation of Dual Government-back Retirement Income Streams

01:27 Model Assumptions for PERS and Social Security Elements

03:08 Change in Retirement Income Working 1 More Year - Claiming Social Security at Full Retirement Age

04:34 Change in Retirement Income Working 1 More Year - Claiming Social Security Early at 62

05:22 Change in Retirement Income Working 1 More Year - Claiming Social Security Late at 70

06:09 Explanation on How to See Full Results on Blog

06:29 Action Items for Viewers

07:23 Preview of Next Video and Outro

08:32 Legal Disclaimer

Transcript

Hi everyone, I'm Ryan Earley, vested PERS member, financial planning firm owner, and host of the PERS Pro YouTube channel. If you are nearing the end of your public service career and wondering whether staying on the job for just 12 more months makes a meaningful financial difference, today's video is for you. We are examining how working one additional year alters both your PERS pension and your Social Security benefits across various salary levels and years of service. Let's get started.

As a Mississippi PERS member covered by Social Security, your baseline retirement includes two separate government-backed lifetime income streams: your PERS pension and your Social Security.

Your PERS Pension formula scales directly with your years of credited service and average compensation. At the same time, your Social Security benefit is determined by your lifetime indexed earnings record and the exact age you choose to claim retirement benefits.

Because both benefits generally increase as your years of service and compensation increases, you cannot evaluate either benefit in isolation. To get an accurate picture of your total retirement income, you must integrate both government-backed income streams together when evaluating how working one more year will impact your total retirement income.

To analyze at a high level the financial impact of working one more year, we modeled total combined retirement income across different salaries ranging from $50,000 to $500,000 and work histories ranging from 25 years to 36 years of service. 

In order to model, we had to make several assumptions. Our baseline model assumes the PERS member was hired prior to July 1st, 2011, and elects the maximum retirement allowance option upon retirement. 

The salary used assumes the PERS average compensation equals the Social Security Annualized Average Index Monthly Earnings. For PERS purposes, average compensation is assumed to be capped at the 2023 internal revenue code limit of $330,000. This allowed me to backcheck my model against the PERS online calculator. 

While Social Security average index monthly earnings is assumed to be capped at the 2026 limit of $4,152 per month or $49,824 per year at full retirement age. The Social Security calculations utilize official 2026 bend points of $1,286 and $7,749. 

Retirees are assumed to have been born in 1960 or later, which resulted in a full retirement age of 67. And years of PERS service credit are assumed to equal years of Social Security work history.

Finally, this analysis assumes the PERS member will receive the same salary in their final year of employment before retiring, which allowed me to isolate the impact of working one more year on total retirement income.

Now let's first look at how working one additional year impacts your combined annual and monthly retirement income when claiming Social Security at your full retirement age of 67. 

When claiming Social Security at full retirement age, working one additional year boosts total retirement income across every salary band. At earlier career stages, such as moving from 25 to 26 years of service, the increase reflects gains in both your PERS pension and Social Security benefits. 

For example, a member earning $100,000 with 25 years of service will see an additional $3,414 per year or $285 per month in total retirement income from both their PERS and Social Security benefits by working one more year and retiring after 26 years of service. 

At later career stages, PERS benefits accelerate at a higher rate per year, whereas Social Security benefits are capped at your highest 35 years of indexed earnings. At higher compensation levels, you will start to see no retirement income growth. For 2026, this sets in at $184,500 for Social Security and $360,000 for PERS. 

When you get past the PERS upper salary limit, working one more year adds a flat amount to your total retirement income, regardless of how high your salary may be.

Next, let's examine the financial outcome if you claim Social Security early at age 62, willing to accept a permanent 30% reduction in Social Security benefits. 

Claiming Social Security early at age 62 reduces the dollar value of the Social Security retirement component due to the statutory 30% early election penalty. As a result, the total dollar increase from working an extra year between 25 and 26 years is lower than at full retirement age. 

For instance, providing $3,140 extra per year at a $100,000 salary compared to $3,414 per year that we just reviewed previously at full retirement age for that same $100,000 salary.

Finally, let's evaluate the results when delaying Social Security until age 70 to earn 24% in delayed retirement credits. Delaying Social Security to age 70 amplifies the benefit of working an additional year later in your career. 

A PERS member earning $100,000 who works from year 25 to 26 sees an annual increase of $3,634 compared to $3,414 at full retirement age. Once Social Security caps out or when moving from 35 to 36 years of service, the incremental increase is driven entirely by the PERS pension, yielding the same flat $8,250 per year, regardless of salary.

If you want to see the full table outputs from the model for years 25 through 36, at all salary levels ranging from 50,000 to 500,000, and for various ages at which you plan to claim Social Security, you can check out our blog, which I will link to in the show notes below.

If you are a PERS member deciding whether to work one more year, here are your action items for today. 

One, review your PERS statement. Check your official PERS annual member statement you receive in the mail to verify your accredited years of service, high four average compensation, 

membership tier and document your estimated maximum retirement allowance. 

Two review your Social Security earnings record. Create or log in to your My Social Security account at SSA.gov to review your earnings history as well as your current average index monthly earnings and projected benefits at ages 62, 67, and 70. 

Three, run a combined income model. Combine your estimated PERS pension with your Social Security estimated benefits across different claiming ages to evaluate the exact dollar benefit in annual and monthly amounts of working one more year.

I hope this video gives you clear insight into how working one extra year impacts your future PERS pension and Social Security benefits. In our next video, we will build directly on today's analysis by answering the question: “What percentage of my retirement income will come from PERS versus Social Security?”

Please make sure you subscribe so you don't miss this and other videos in our new late career series. If you found this video helpful, you can thank me by hitting the thumbs up button and sharing it with other PERS members. 

And finally, if you are looking for a financial planning firm that specializes in helping Mississippi PERS members build comprehensive tax-efficient retirement strategies, including coordinating PERS Pension and Social Security optimization, please visit our website at perspro.ms to learn more about how we help PERS members like you.

Thank you for your viable public service to the state of Mississippi. We'll see you next time.

Disclaimer, this video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.