Ask Larry: If We Lose Benefits To The Earnings Test, Will Our Family Maximum Increase At FRA?

Today’s column addresses questions about whether losing benefits to the earnings test will increase the family maximum at full retirement age, verifying past wages along with what wages are counted for Social Security and the family maximum’s potential effects on children’s benefits. 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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If We Lose Benefits To The Earnings Test, Will Our Family Maximum Increase At FRA?

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Hi Larry, I’m thinking of taking Social Security at 63 and will likely be at the family maximum since I have a disabled adult child. If we make more than the limit before FRA, will our family maximum increase at FRA to be able to get back any money that we lost by earning too much between 63 and FRA? Thanks, Jospeh

Hi Joseph, Your current and future earnings could potentially increase both your primary insurance amount (PIA) and your family maximum benefit (FMB) FMB rate regardless of when you claim benefits. And the FMB is the maximum that can be claimed on a single record, not the maximum benefits that can be received by the family based on multiple records.

A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing at full retirement age (FRA). However, a person’s PIA and the FMB that can be claimed on their record are calculated based on an average of their highest 35 years of Social Security covered wage indexed earnings, so your current and future earnings will only increase your PIA and FMB if you earn more in a year than you did in one of your previous highest 35 earnings years.

What won’t increase either your PIA or your FMB is if you file prior to FRA and some of your benefits are withheld due to the Social Security earnings test. All that would happen in that case would be that your own reduced monthly benefit rate would be adjusted effective with the month you reach FRA to remove the percentage reduction that was applied to your retirement benefit rate for any months that your benefits weren’t paid because you earned too much. The benefit withholding wouldn’t have any direct impact on either your PIA or FMB, nor would it cause the benefit rates of your eligible family members to increase.

Before filing, you should strongly consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to do your Social Security planning. The software is fully programmed to consider both the effects of the earnings test on benefits, and benefit recalculations that may result from your current and future earnings. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

How Do I Verify Wages From Over 40 Years Ago?

Hi Larry, I am reviewing my yearly Social Security statement for over 40 years work of work. I can tell that my earnings in some years are not reported and I don’t have paycheck stubs for those years. I do notice a pattern however. It seems like whenever I worked for a government agency, my wages are not recorded. How do I recover and verify wages from over 40 years ago?

My 1990 statement says that I earned 35 credits, but for all years after that through 2018, it says 31. In 2019, I earned a small amount of money 3,831 and my credits went back up to 35. Why did my credits go down and then up again? I don’t have Social Security income for 30 years because I paid into a separate pension system. Thanks, Dale

Hi Dale, Based on your description, the most likely explanation is that your government earnings were exempt from Social Security taxes. In that case, the earnings would correctly be missing from your Social Security earnings statement. The only earnings that should be included on your Social Security statement are earnings on which you paid Social Security taxes, or earnings on which you paid Medicare taxes only..

On the off chance that Social Security taxes were withheld from earnings that are missing from your Social Security earnings history, then there’s very little chance that you could be credited with those earnings unless you retained proof of the earnings. The ideal proof would be a W-2 form showing that Social Security taxes were withheld from your earnings, although other evidence can potentially be used. Social Security has a database of earnings that weren’t correctly associated with the employee involved, but most of the earnings on that database were unassociated due to an incorrect or missing Social Security number.

I can’t explain the discrepancy on your statements with regard to the number of quarters of coverage (QC) that you have. If you paid Social Security taxes on earnings of $3,831 in 2019, that would only give you 2 QCs. The exact number of QCs for years prior to 1978 can’t be determined based on a person’s yearly earnings, so if you had Social Security covered earnings prior to 1978, that might explain the discrepancy. QCs in years prior to 1978 were credited based on the amount earned in each calendar quarter, and only yearly earnings are reflected on Social Security statements. Quarterly earnings breakdowns are only available in Social Security’s internal records. If you call Social Security, they should be able to access your earnings history and give you the accurate number of QCs that you’ve earned to date. Best, Larry

Will My Son’s Benefit Increase When His Brother’s Benefits Stop?

Hi Larry, My son is 17 and his stepbrother receives survivor benefits from his deceased father. His brother turned 18 and graduated from high school last month. Will my son’s benefit increase? Or are the boys eligible until a later age? Thanks, Steve

Hi Steve, Survivor benefits can be paid to eligible children who are a) under age 18, or b) 18 to 19 and attending high school, or c) any age if they became disabled prior to age 22. A child who is age 18 or older and in college wouldn’t qualify for survivor benefits unless they’re disabled.

If only two children and no other survivors have been drawing benefits on their deceased father’s record, then your son’s benefit rate would not increase when his brother becomes ineligible for benefits. The maximum benefit rate for a surviving child of a deceased worker is calculated at 75% of the deceased worker’s primary insurance amount (PIA). The family maximum benefit (FMB) that can be paid on a deceased worker’s record is always at least 150% of the deceased worker’s PIA, so up to two children can collect their full benefit rates without being reduced by the FMB.

So assuming that the two children you mentioned are the only survivors who’ve been receiving benefits on their father’s account, then your son is already being paid his full benefit rate and his rate won’t increase when his brother’s benefits stop. Best, Larry

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