Ask Larry: Will My Social Security Retirement Benefits Increase If I Keep Working After Filing?

Today’s column addresses questions about how continuing to work can increase benefit amounts, whether to file for early retirement benefits while receiving Social Security disability benefits and how the earnings test can affect a benefit taken before full retirement age. 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.

See more Ask Larry answers here.

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

Will My Social Security Retirement Benefits Increase If I Keep Working After Filing?

Hi Larry, I started collecting my Social Security at 66 and continue to work full time. If while doing this my salary falls into one of my top 35 years of earnings, will my benefit increase until I am 70 as long as I work and earn? Thanks, Cliff

Hi Cliff, If you continue working and paying into Social Security, your Social Security retirement benefit rate can be recomputed annually regardless of your age. It doesn’t matter whether of not you are currently drawing benefits.

Social Security uses your calendar year earnings, and any recomputed benefit rates become effective with benefits due for January of the year following the year of the earnings. In other words, if you’re due a benefit increase resulting from your 2020 earnings, your increase would be effective with your benefit payment for January 2021.

Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings, so additional years of earnings only increase a person’s benefit rate if they’re higher than one or more of the 35 years currently being used to calculate the person’s benefit rate.

Earnings recomputations are processed automatically by Social Security around September of each year, and any back pay due for people who are currently receiving benefits is paid immediately after the recomputation is processed. Best, Larry

Can I Apply For Early Retirement Benefits If I’m Getting Social Security Disability?

Hi Larry, I am on Social Security disability and wanted to know if I can apply for early Social Security retirement benefits? Thanks, Gloria

Hi Gloria, You could apply for Social Security retirement benefits as early as 62 even if you’re drawing Social Security disability (SSDI) benefits, but you couldn’t be paid both benefits at the same time. You’d have to choose which benefit that you want to draw, and since SSDI benefits are not reduced for age, you’d be likely be taking a benefit cut if you switch to drawing retirement benefits prior to full retirement age (FRA).

SSDI benefits are calculated at 100% of a person’s primary insurance amount (PIA), as are Social Security retirement benefits if you start drawing them at FRA. However, Social Security retirement benefits are reduced for age if you start drawing them prior to FRA, so opting to switch from SSDI to retirement benefits at age 62 would result in a benefit rate reduction of roughly 25% to 30% depending on the person’s year of birth.

About the only times that switching from SSDI to retirement benefits prior to FRA may be advantageous is if a) the person’s SSDI benefits are being offset due to the receipt of workers compensation or public disability benefits, or b) if auxiliary beneficiaries eligible for benefits on the disabled worker’s record would be eligible for higher payments if the worker switched to retirement benefits.

At FRA, your disability benefit will automatically switch to a standard retirement benefit and the rate should stay the same. Best, Larry

Is It True That I Can’t Draw Widow’s Benefits If I Earn More Than $18,000 This Year?

Hi Larry, My husband died three years ago and before I turned 60 ,I called social security about receiving widows benefits. I was told that if I made more than $18,000 a year I couldn’t. Is this true? I also have a friend in the same situation. Thanks, Kerry

Hi Kerry, I’m sorry for your loss.

It doesn’t sound like Social Security gave you the full story. If you file for widow’s benefits this year and you’re under your full retirement age (FRA) all year, Social Security would need to withhold $1 of your current year benefits for each $2 that your 2020 earnings exceed $18,240. Whether or not that would cause all of your benefits to be withheld depends on your benefit rate and how much you’ll be earning.

Your best filing strategy could be either filing for reduced widow’s benefits early and then switching to your own record at 70, or filing for reduced retirement benefits on your own record early and then filing for unreduced widow’s benefits at full retirement age (FRA).

Normally, you would want to start out drawing the lower benefit first and then switch to the higher record when it reaches its highest potential rate. My company’s software — Maximize My Social Security or MaxiFi Planner — could help sort all of this out for you so that you can determine the best strategy for maximizing 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