What Affect Would My Flexible Benefit Contributions Have On Future Social Security Benefits?
Since contributions to a Flexible Benefit Plan lower annual earnings against which Social Security deductions or employer contributions are made, there is a valid concern that participation in these plans would result in reduced Social Security benefits at retirement. For a person born after 1928, the Social Security benefits are calculated using a 35-year average of earnings. A reduction of $2,000 a year or even $5,000 a year over some portion of this 35-year span would have little effect on the average salary and, therefore, minimal impact on the Social Security benefits. The Social Security Administration has provided the U.S. Division of Pensions and Benefits with an example of an employee who retired in 1998 at age 65 whose wages had been at the maximum wages subject to Social Security deductions. Upon retirement, this individual’s monthly Social Security allowance was $1,343. If that same person had been contributing $2,000 a year for the last 10 years to a Flexible Benefits Plan
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