Retirement isn’t always final. Often, individuals will retire and file for Social Security and later decide they’d like to continue working for a while longer. When this happens, it typically leads to a few questions about the impact to their Social Security benefit.

One of the most common questions is, “what happens if you file for Social Security, but keep working? Could your benefits increase?”

I’ve also heard, “what if I’m making less in my ‘post-retirement’ job, could my Social Security benefit decrease?”

The short and sweet answer to both of these questions is that your continued work could result in a benefits increase, but not a decrease.

To fully understand this, it helps to have a basic knowledge of the Social Security formula. (If you’d like to get into the fine details, check out this video I made on the topic.)

Here’s the quick summary of how benefits are calculated.

Will Future Earnings Be Counted for Social Security?

At age 62 your benefit is calculated using the formula that’s specified for those turning 62 in that calendar year. But before the Social Security Administration can run this calculation, they have to calculate your personal earnings history.

This is accomplished by taking all your earnings through age 59 and adjusting them to account for inflation. Any earnings at 60 and beyond are used at face value.

Once they’ve built your prior earnings record they take out the highest 35 years. If you didn’t work enough to have 35 years of earnings, the calculation will still include 35 years, it’ll just use zeroes in the years of no work. So for example, if you only worked for 25 years, your benefits will be calculated with 25 years of earnings and 10 years of zeroes. Just remember that on the other side, if you worked for 45 years, only the top 35 years are used.

So now that you know it’s your highest 35 years of earnings that are used, understanding how your benefit may change with continued work simply becomes an issue of comparing what you are making today with the earnings in your list of 35 years of inflation-indexed earnings.

If your current earnings exceed one of the years in your list of 35, your benefit will be recomputed and your benefit will increase.

Keep in mind that you’re comparing your current earnings to your prior earnings after those prior earnings have been adjusted for inflation so one of the most important steps is to understand how to apply that inflation adjustment. Don’t worry…it’s actually pretty easy with a simple calculator.

First you want to get your earnings history from the social security administration. This is typically page three of your benefits estimate and you can print that on your mySSA account.

Will Working In Retirement Increase Your Social Security Benefit?

Once you have your earnings history you’ll want to go over to the SSA website and get the inflation indexing factors that are specific to the year you turned 62. All you need to do is put in the calendar year you turned 62 and it’ll instantly give you all the indexing factors. Then all you have to do is take your real earnings, multiply by the factor shown for each year.

From that point it’s a simple matter of figuring out which years are your highest 35 and crossing out the other. This will give you your list of earnings that you can use to compare any future earnings. 

If your current or future earnings will be higher than any of the adjusted earnings in your list of 35, the lower earnings year will be replaced. With a lower year falling off, and a higher year added, the overall average 35-year earnings will increase. Then your benefit will be recomputed using the same formula used when your benefit was calculated (the formula in place the year you turned 62).

That’s the basics of how it works, but this still leaves plenty of questions.

Can a recomputation decrease my Social Security benefit?

No, a recomputation will only be applied if your primary insurance amount can be increased by at least one dollar.

Is a recomputation of benefits the same as a recalculation of benefits?

In the normal world we live in those two terms are synonymous. That’s not the case with the Social Security Administration.  As noted above, a recomputation can only increase your benefit. A recalculation can increase or decrease it. The Code of Federal regulations says, “Unlike recomputations, which may only service to increase your primary insurance amount, recalculations may serve to either increase or reduce it.”

Typically, a recalculation is due to an error in the original calculation.

How common is a recomputation of benefits?

It’s actually VERY common. In fact, nearly everyone has at least one benefits recomputation.

This is because of how your earnings are reported to the SSA. In most cases your benefit calculation does not include your prior year of earnings because these earnings are not reported to the Administration until the fall of the following year. For example, earnings for 2020 won’t be reported until the fall of 2021.

The Code of Federal Regulations says, “Because of the way reports of earnings are required to be submitted to us for years after 1977, the earnings you have in the year before you become entitled to old-age insurance benefits, or become disabled or in the year you die might not be reported to us in time to use them in computing your primary insurance amount. We recompute your primary insurance amount based on the new earnings information and begin paying you (or your survivors) the higher benefits based on the additional earnings, beginning with the month you became entitled or died.”

Is a recomputation automatic?

The recomputation process is supposed to be automatic. According to the rules they say “when a recomputation is called for, we perform it automatically.” But, as you may have guessed, there are sometimes a few hiccups in this system. So you don’t have to wait on they to initiate their “automatic” process. You can request this recomputation with evidence that you have earnings in addition to what they used when they calculated your benefit. You would simply need to visit a Social Security office to get this started.

Can a recomputation pay you retroactively?

If the Social Security Administration performs a recomputation and finds that your benefit should increase, the increase will be paid back to January of that year. For example, your earnings for 2020 will become available for a recomputation around September of 2021. In this example, the benefits increase would be paid retroactively from January of 2021.

Don’t forget about the earnings test!

If you file for Social Security before your full retirement age and keep working, keep in mind the earnings limit will apply to you. You need to make sure you don’t run afoul of these rules.

If you still have questions, you could leave a comment below, but I don’t get to check those very often. What may be an even greater help is to join my FREE Facebook members group. It’s very active and has some really smart people who love to answer any questions you may have about Social Security. From time to time I’ll even drop in to add my thoughts, too.

You should also consider joining the 125,000+ subscribers on my Social Security Intelligence YouTube channel! For visual learners (as most of us are), this is where I break down the complex rules and help you figure out how to use them to your advantage.

If you want to see some of the work I do in the broader retirement planning space, you should check out my Big Picture Retirement YouTube channel. This is a brand new platform where I, along with attorney John Ross, talk about all the factors impacting your successful retirement.

One last thing that you don’t want to miss: Be sure to get your FREE copy of my Social Security Cheat Sheet. This handy guide takes all of the most important rules from the massive Social Security website and condenses it all down to just one page.

Here are a few additional helpful resources if you’d like to research the topic we’ve discussed in this article.  

GET YOUR INDEXING FACTORS HERE
https://www.ssa.gov/OACT/COLA/awifactors.html

Code of Federal Regulations 404.281 – 404.288 Recomputations
https://www.ssa.gov/OP_Home/cfr20/404/404-0280.htm

Code of Federal Regulations 404.290 Recalculations
https://www.ssa.gov/OP_Home/cfr20/404/404-0290.htm

SSA webpage on bendpoints

https://www.ssa.gov/oact/cola/bendpoints.html

POMS RS 00605.580 Recalculation of Benefits
https://secure.ssa.gov/poms.nsf/lnx/0300605580

POMS RS 01404.005 Lag Period – and Lag Earnings
https://secure.ssa.gov/apps10/poms.nsf/lnx/0301404005

SSA Webpage on how to calculate your benefit

https://www.ssa.gov/pubs/EN-05-10070.pdf

CRS Report: How Social Security Benefits Are Computed
https://fas.org/sgp/crs/misc/R43542.pdf

https://www.kitces.com/blog/social-security-and-working-how-adding-to-social-security-work-history-can-increase-retirement-benefit/

There are some cases where you can receive retroactive Social Security benefits, usually delivered via a one-time lump sum payment when you file for your retirement benefit.

Overall, this can sound like a great deal. It might feel like a little extra, and the lump sum means you can do what you want with that money right away instead of waiting for it to come to you in monthly payments.

But are retroactive Social Security benefits truly a good thing? Here’s what you need to know to make this decision for yourself.

On paper, the Social Security system has a generous payment to beneficiaries of someone who retires, dies, or becomes disabled. But what catches many people by surprise is that there’s a limit to these payments.

The Social Security family maximum benefits rule may stop you from getting the full amount you might expect.

This article takes a very deep dive into the issue to explain both the common, well-known rules around the Social Security family maximum benefits — and the more obscure rules that cause benefits to be capped to a range of 150%-188% of a retired, deceased or disabled individual’s full retirement age benefit.

We’ll also go over the calculation, and teach you how to determine what kinds of benefits to expect in your own situation.

The Social Security surviving spouse benefit seems easy enough to understand. But hidden in the details are small nuances that can cost you – or your loved ones – thousands of dollars in missed benefits.

If you invest the time to make sure you know the rules, you won’t end up like the 10,000 people that a 2018 Office of the Inspector General report discovered had been shortchanged by $131 million in Social Security survivor benefits.

Here, we break down what you need to know about ensuring you receive all the benefits you’re entitled to in three, easy-to-digest sections:

It’s rare for me to have a guest article on my site. However, a few weeks ago, I had a meeting that disturbed me. As soon as the meeting was over I contacted Texas Elder Law Attorney John Ross and asked him to write this guide for my readers on how to use Medicaid Long Term Care to pay for nursing home expenses.

I just couldn’t see a story like this happen again.

It’s been a few weeks now, but I still think about this meeting often. Listening to the woman that I met with her and her story was heartbreaking. I felt so sorry for her — but there was nothing I could do to help her.

I’m sharing her story with you here in hopes that someone else won’t make the same mistakes.

Jo’s husband died when he was 44. Jo was only 43, and up until that point, they ran a successful plumbing supply business together. Jo and her husband earned a high income, and his passing left her with the burden of running a demanding business alone.

She didn’t spend a lot of time thinking about her future Social Security benefits at that point of her life. But things are different now.

Jo is about to turn 60. She’s been told that she can qualify for Social Security survivors benefits, and has also heard that the Social Security Administration has a history of miscalculating these benefits — so Jo wants to make sure she understands the math herself.

You Can’t Use the Normal Calculations to Understand Social Security Survivors Benefits

Turning 66 in 2019? That means the maximum Social Security benefit you could receive is $2,861.

That’s no small sum! If you wanted to get that same amount of income from a portfolio of retirement savings you’d need A LOT of money at the beginning of your retirement.

And it could get even better for you if you waited to file for Social Security. In 2019, the maximum benefit for an individual who delayed filing for benefits until age 70 is $3,770 per month. That’s more than $45,000 per year in benefits!

With dollars like these at stake, it makes good sense to pay attention to the best filing strategies for you — and how to potentially claim the maximum Social Security benefit.

What’s one of the most generous benefits available to retirees? That’s easy. It’s Social Security spousal benefits! These benefits are some of the most important, too.

Why? Because the spousal benefit can give your household income a big boost if you know all the rules about how to use it.  

A recent Social Security report found that 2.3 million individuals received at least part of their benefit as a spouse of an entitled worker. Some of these spouses had benefits of their own, but were eligible to receive higher benefit because the spousal benefit amount was greater than their own benefit.

Others never worked outside the home or paid Social Security tax. They have no benefit of their own, but thanks to the Social Security spousal benefit available under their spouse’s work record, they can still receive payments.

This particular benefit doesn’t just provide retirement income, either.

As an eligible spouse, you could also receive premium-free Medicare benefits. Receiving these can help you reduce your out-of-pocket healthcare costs, allowing you to stretch your nest egg even further to create the retirement you want.

Clearly, Social Security spousal benefits offer serious value to those approaching the right age to file. So how do you access them, and what do you have to know to best work the rules?

Let’s take a look at what it takes to qualify as well as what benefits you may receive as an eligible spouse.

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If you’re building a retirement income plan (and I hope you are!), Social Security will likely play a role. As such, you need to know what to expect in Social Security benefits when constructing your plan to ensure it works.

Unfortunately, your Social Security benefits estimate from the statements you can pull from the Social Security Administration is not the best source of information on what to expect in the future.

The issue lies with the omissions that the Administration makes with their estimate methodology. To understand why this is a problem, we need to start with a basic overview of the calculation used to create your Social Security benefit estimate.

If you haven’t yet reached your full retirement age but want to file early for your Social Security benefits, you need to know there’s an earnings limit.

In other words, if you earn over a certain amount of income… your benefits may be reduced.

We’ve talked about this at length on both this blog and my YouTube channel, and we field a lot of questions about this topic. One of the questions I hear all the time from married couples is this one:

“Whose earnings are they counting? If you’re married, can your spouse’s earnings affect your Social Security benefit?”