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Social Security Continues to Recalculate Your Benefits After Retirement - MSN - US Money
Your Social Security benefits continue to be recalculated after you retire and start receiving benefits. Other factors, besides COLA increases, can also increase your benefits after you retire. Your Social Security amount is based on your highest 35 years of earnings. When you do not have 35 years of earnings, Social Security adds zeros to make 35 years. A five-year gap in work, such as staying home to care for family, can reduce your benefit by $150 or more. When you continue working beyond your full retirement age (FRA), your benefits are recalculated each year to see whether you are entitled to an increase. If you do not have 35 years of earnings, anything you earn will replace one of those zeros and increase your benefit. However, if you retire and make less money than the 35 years already used in the calculation, you will not see an increase.
Social Security adjusts all your earnings through age 59 for inflation. This means they are worth more now than when you earned them. For example, if you are turning 62 in 2027 and you earned $50,000 in 1994, it is now valued at $153,241. This amount is used to calculate your Social Security benefit. However, your earnings statement shows only the amount you actually earned in 1994. Social Security adjusts the Indexing Factors for earnings every year. To see what your earnings are worth now, use the SSA Indexing Factors for Earnings.
If you take your Social Security benefits early, earn too much, and have payments withheld, those payments are not permanently lost. When you reach your FRA, Social Security will recalculate your benefit to account for those withheld payments. For example, if you lost six months of benefits by exceeding the earnings limit, they will recalculate your benefit as if you retired six months later and increase it.
Carl Sullivan has written an article covering this topic.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.