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Returning to the Workforce in Retirement? Here’s a Common Question - msn.com; AMAC Foundation
Rejoining the workforce after claiming retirement benefits, as well as claiming benefits while continuing to work, raises an oft-asked question: Will my benefit increase as a result of paying more FICA taxes? That’s the subject of an msn.com article posted by MarketWatch Retirement Reporter Alessandra Malito, and it’s a question we receive frequently here at the AMAC Foundation Social Security Advisory Service. The expectatioon is generally that benefits will increase as a result of paying additionan FICA taxes. Logical, right?
Well, the correct answer to that question is a clear maybe. Or, as we often say, “it depends.” Ms. Malito correctly points out that a benefit increase in this scenario is “possible.” She explains several scenarios that could lead to a change in benefits, one of which focuses on Social Security’s original benefit calculation and its averaging of up to 35 years of earnings to set the initial benefit. In her example, she notes that if any of the additional years of employment exceed the average earnings figure used for the initial benefit, then Social Security will automatically increase benefits accordingly.
While this is generally an accurate analysis, one key point is missing in the explanation. In determining the (up to) 35-year average earnings, Social Security takes each year in the claimant’s earnings record and indexes it, or present values it, to account for inflation during the course of a career. The additional years’ earnings need to exceed the indexed amount, not just the nominal amount.
This is certainly a dense subject, but it needs to be understood to answer the question of whether additional work years will increase benefits. If you need help understanding the intricate calculation Ms. Malito references in her article, feel free to call on the AMAC Foundation’s free-to-the-public Social Security Advisory Service for assistance. Click here to lern more about this highly acclaimed service.