Ask Larry: Shouldn’t My Income Increase My Social Security Retirement Benefit?

Today’s column addresses questions about when continuing income after full retirement age (FRA) might increase Social Security retirement benefit rates, whether the earnings test affects eligibility for a survivor’s benefit and filing online. 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.

Shouldn’t My New Work Income Increase My Social Security Retirement Benefit?

Hi Larry, I will be receiving a pension from my job when I retire soon at 70. Will this reduce my monthly Social Security benefits? Also, I am still working at age 69, but I did not get any credits in my Social Security benefits since I reached 66, only the 8% annual increase. I called SSA, but no body gave me a convincing answer. Shouldn’t my continuing income increase my benefit amount also? Thanks, Kurt

Hi Kurt, Your pension could only affect your Social Security benefits if the pension is based on earnings that were exempt from Social Security taxes. In that case, Social Security benefits drawn on your record could be adversely affected due to the Windfall Elimination Provision (WEP) and any benefits you received on a spouse’s record could be reduced by the Government Pension Offset (GPO).


It isn’t clear from your question whether or not you are currently drawing your Social Security retirement benefits, but there are two different things that can potentially increase your Social Security retirement benefit rate after you reach full retirement age (FRA). One is delayed retirement credits (DRCs), which increase your benefit rate by 2/3rds of 1% for each month that you aren’t paid benefits between FRA and age 70. If you’re already drawing your Social Security retirement benefits, you can’t accrue additional DRCs.

The other thing that can potentially increase your benefit rate is if you earn more in a year than you did in one or more of the previous highest 35 wage-indexed earnings years your current benefit rate is based on. Your earnings must, of course, be subject to Social Security taxes in order to be used in the calculation of your benefit rate.

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.

If you’re already drawing your Social Security benefits and you think that your earnings last year were high enough to increase your benefit rate, Social Security should increase your rate automatically.

If they don’t, you can submit a written request for a recomputation of your benefit rate, along with proof of your most recent year’s earnings (e.g. W-2 form). My company’s software — Maximize My Social Security or MaxiFi Planner — can also calculate your correct retirement benefit rate based on your earnings history. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can My Mother-In-Law Apply For Widow’s Benefits?

Hi Larry, My mother-in-law is 66 and has never claimed Social Security survivor’s benefits from her late husband who passed in 2004. Can she now apply for those Social Security benefits? If she decides to work, how much can she make a year while claiming those benefits? Thanks, Phil

Hi Phil, Yes, your mother-in-law could apply for widow’s benefits, and since she’s reached her full retirement age (FRA), there’s no limit on how much she could earn and still be able to potentially collect these survivor’s benefits. However, your mother-in-law couldn’t claim survivor benefits retroactively for any months prior to the later of a) the month she reached FRA, or b) six months prior to the month she files her application. Best, Larry

Does Filing Online Sound Reasonable For Me?

Hi Larry, I will turn 70 in mid-January, 2022. I am single, never married, no children, no dependents. I am still working, though I will probably leave my job somewhere in 2021, but have not yet decided. I have read your book, and have now just finished by second re-read, or run through it, focusing on those points I think most relevant to me.

I am aware that I need to request in writing when I file that I do not want to activate my benefits six months retroactively, that I wish only to have them start on my 70th birthday, preserving my delayed retirement credits in full. I’ve also heard that I should request my preference on how Social Security deducts for income taxes and, when the time comes, my Medicare payment.

I’m thinking of filing online. Does that sound reasonable? Is there a risk I am not seeing to filing online, carefully calling out in the remarks section the I do not want a retroactive payment? Is there anything else obvious to you that I am not thinking of, something I am missing? Can this process really be fairly straight forward for someone with my history? Thanks, Suzanne

Hi Suzanne, Yes, it sounds like you’d do fine filing online. Assuming that you want your benefits to start at 70 and if you reach 70 in mid January 2022, you’ll want to choose January 2022 as your month of election to start your benefits. Your first payment (i.e. for January) will then be scheduled for delivery in February. Social Security pays regular monthly benefits a month behind.

Nothing in your question leads me to think that you’re forgetting anything. As far as I know, there is no question on any Social Security application regarding income tax withholding. If you want to have income taxes withheld, though, you can add a statement to that effect in the remarks section of your online application. You can choose to have either 0%, 7%, 10%, 12% or 22% percent of your benefits withheld for federal taxes.

By the way, I also think it would work out fine if you decide to file by phone with a Social Security representative. If you do, just be sure to review your copy of the application carefully for accuracy. Best, Larry

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