Dear Rusty: I will be 72 in July. I started taking my Social Security at age 64 after a job loss and other items that came up. So, my plan to wait past 68 evaporated, but I have continued to work since that time at a considerably smaller amount. I have contacted Social Security about increasing my “entitlement” since my earnings of late are considerably more than my first few years of earnings. Using the formula of the highest earnings over the last 35 years divided by 420 my monthly increase would be about $500. I’ve contacted Social Security several times about this. Their standard reply is that they evaluate all accounts every October and if any adjustments are to be made, they will be made in March of the following year. Nothing has changed with regards to this as I’ve continued to work. Does the fact that I claimed my benefit at age 64 take me out of the equation? Signed: Working Still at 72
Dear Working: The Social Security representatives you spoke with told you correctly – they examine your recent earnings every year and will automatically adjust your benefit if it is appropriate to do so. But the dollar values they look at to see if you should get a benefit increase may not be what you think.
When you claimed your SS benefits at age 64, they computed your benefit using the highest-earning 35 years you had at that time, but they “indexed” those earnings (adjusted them for inflation) for the year you turned 60 and earlier. That means that to arrive at your age 64 benefit, they increased your historical earnings by an inflation percentage for each year, to pay your benefit in current dollars. For example, if your 1985 earnings were $25,000, that would be about $62,000 in today’s dollars and that is the amount they used to compute your benefit. But that is also the amount you would need to exceed today to have your current earnings increase your monthly benefit amount.
So, unless your most recent earnings exceed the inflated dollar amounts used to compute your benefit at age 64, your monthly benefit won’t change. Keep in mind too that Social Security uses only the 35 years over your lifetime in which you earned the most, so years with lower earnings (for example, when you first started working) probably aren’t included in the computation.
In any case, rest assured that claiming at age 64 didn’t disqualify you from getting a bigger benefit if you’re entitled to one because your current earnings exceed the inflation-adjusted amounts originally used. Everyone who works and earns, even if they are already collecting Social Security, will have their earnings record reviewed every year to see if their current earnings entitle them to a bigger benefit. If so, it is automatically given.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email ssadvisor@amacfoundation.org.
