Ask Larry: Will My Higher Earnings Now Increase My Social Security Retirement Benefit?

Today’s column addresses questions about whether and when recent higher earnings will increase a retirement benefit already filed for, whether filing for and suspending a retirement benefit would be advantageous and benefits potentially available on an ex’s record. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.

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Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.

Will My Higher Earnings Now Increase My Social Security Retirement Benefit?

Hi Larry, I have earnings now after retirement that are likely high enough to replace some of the lower earning years currently included in my benefit calculation.

Will those years initiate a benefit recalculation and a possible retroactive adjustment, even though I am now well into my retirement period? I am currently just shy of 72 and I did not take my retirement benefit until 70. Thanks, Jeff

Hi Jeff, Yes, regardless of your age you can still increase your Social Security retirement benefit rate if you earn more in a year than you did in one of your previous highest 35 years of Social Security covered wage-indexed earnings.

Social Security automatically recomputes benefits to consider higher years of earnings, so you shouldn’t need to do anything in order to get any benefit increases for which you qualify.

However, you could optionally submit to Social Security proof of your higher earnings (i.e. W-2 form for wages or Schedule SE from a tax return for self-employment earnings) along with a written request for a manual recomputation. Best, Larry

Would There Be Any Advantage To My Filing For And Suspending Benefits?

Hi, Larry I was born in 1955 and will reach my full retirement age in April of 2021. I am single, never married and have no dependents. Is there any advantage to my filing for and then immediately suspending benefits at my FRA?

I have heard that if I want to wait longer than my FRA up to 70 to actually receive benefits in order to increase the monthly amount, a strategy of file and suspend would allow me to receive suspended benefits owed to me starting at my FRA if I later decide I need to start receiving them before 70. Would there be any advantage in doing this? Thanks, Matt

Hi Matt, Filing for and suspending your benefits could be disadvantageous in the event that you later change your mind and want to start collecting benefits sooner. The option to be paid suspended benefits retroactively after filing for and suspending benefits was eliminated by congress in the 2015 Social Security amendments.

People who voluntarily suspend their benefits after 4/29/2016 cannot reinstate their benefits any earlier than the month after the month that they request reinstatement. As a result, it’s virtually always wiser to delay applying for benefits in order to earn delayed retirement credits (DRCs) as opposed to filing for and suspending benefits.

You will accrue DRCs for any months that you don’t collect benefits between your full retirement age (FRA) and 70 regardless of whether you file for and suspend your benefits, or if you simply delay filing for your benefits. And If you wait until after FRA to apply for your benefits, you would have the option to claim your benefits up to six months retroactively from the month of your application or back to your FRA if that’s less than six months.

However, you would not receive DRCs for any months that you collect retroactive benefits. On the other hand, if you’ve filed for and suspended your benefits you couldn’t later change your mind and request to be paid retroactive benefits. So waiting to apply gives you more flexibility with regard to choosing when to start drawing your benefits than does filing for and suspending your benefits.

You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully explore your available options and determine how best to maximize your benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Am I Entitled To My Ex-Spouse’s Social Security Benefits In Addition To My SSDI?

Hi Larry, I collect SSDI and I was married to my ex for 20 years. Am I entitled to any Social Security benefits on his record? Thanks, Shelly

Hi Shelly, If your ex is living, you could potentially qualify for divorced spousal benefits in addition to your Social Security disability benefit (SSDI) at some point in time, but only if 50% of your ex’s primary insurance amount (PIA) is more than your full SSDI rate. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA), or their full SSDI rate.

Additionally, in order to qualify for divorced spousal benefits, you’d need to be unmarried and be either at least 62 or have a child who is under age 16 or disabled in your care who qualifies for benefits on your ex’s Social Security record, and your ex would need to be at least 62 or drawing his or her benefits.

If your ex is deceased, you could potentially be eligible for disabled surviving divorced spousal benefits as early as 50, but only if you’re unmarried and your ex’s PIA (or PIA + delayed retirement credits if he or she didn’t start drawing benefits until after FRA) is higher than your full SSDI rate. To be eligible for survivor benefits prior to 50, you would need to be unmarried and have a child in your care who qualifies for benefits on your ex’s Social Security record and who is who is either under age 16 or disabled. Best, Larry