PAYING SOCIAL SECURITY TAX DOESN’T INCREASE

BENEFIT

If I started drawing Social Security benefits in May of 2007 at age 62 and continued to work and pay Social Security taxes to date, can I expect an adjustment in my benefits?

Not from simply paying the Social Security payroll tax, because paying your FICA taxes while you continue to work isn’t what will cause an adjustment in your benefit amount. Everyone who works and earns (except certain public sector employees) must pay the Social Security payroll tax, even if you’re collecting Social Security, and that has nothing to do with your personal Social Security benefit amount. Those Social Security FICA contributions you pay while you’re working go into the Social Security Trust Fund, which is a special fund from which all Social Security benefits (and only Social Security benefits) are paid.

Your benefit amount at age 62 was based upon your lifetime work record at that time - specifically, the 35 inflation-adjusted years in which you had the highest earnings. If you continued to work after you claimed your Social Security benefits, and your earnings for any current year are more than in any of those 35 years used to originally compute your Social Security benefit, then you would get a small increase in your benefit amount. But remember that to determine if an increase is appropriate, your earlier years’ earnings are adjusted for inflation. That means that your current earnings would need to be more than the inflation-adjusted earnings to cause a benefit increase.

Each year, Social Security looks at your earnings and determines whether your lifetime “average indexed monthly earnings” (AIME) number has changed, warranting a benefit increase. That annual review continues for as long as you are earning, and whenever you earn enough to replace one of those 35 years used to originally compute your AIME you will see an increase. But if your current earnings aren’t high enough to replace one of those earlier years, your benefit amount will stay the same. Except, of course, for any Cost of Living Adjustments (COLA) which may be granted annually (2018 COLA was 2% and 2019 COLA will be 2.8%).

MAXIMIZING SPOUSAL

BENEFITS

My husband turns 68 next year, and I will be turning 66. He plans on continuing to work and retiring at age 70 to maximize his monthly Social Security benefits. I am retiring next year due to a spinal injury. Since my monthly maximum is based on his, we are trying to figure out when mine should be activated to earn the highest benefit amount. Do I need to wait until he reaches age 70 to maximize mine, or can I activate it next year at the lesser amount and would Social Security adjust it to the higher rate when he activates his?

Your eventual spousal benefit from your husband’s Social Security record will be based upon his full retirement age benefit amount, not on the increased benefit he will get by waiting until he is age 70 to claim. Thus, you don’t gain anything by waiting past your full retirement age and until he claims his at 70 to start your own benefits. If you will be 66 next year, I assume your year of birth is 1953, which means your full retirement age (FRA) is 66. That means at age 66 you will get 100% of the benefit you have earned from a lifetime of working. By starting your benefits at age 66, your husband can then file a “restricted application for spousal benefits only” and collect 50% of the amount you are collecting, while allowing his own Social Security retirement benefit to continue to grow (it’s already growing, but without him getting a spousal benefit from your record).

He can do this because he was born before the January 2, 1954 cutoff date after which that option was eliminated. By filing the restricted application after you start your benefits, your husband can collect a spousal benefit from you while he is still earning delayed retirement credits (DRCs) for himself, which will mean his benefit at age 70 will be 32% more than it would have been at his FRA of 66. Then, when your husband claims his own benefit at age 70, you should apply for your spousal benefit, which will be 50% of his FRA benefit amount (you get that if it is more than you are getting from your own work record). And in the intervening months between when you apply at age 66 and when he claims his own benefits at age 70, your husband will have collected about 2 years worth of spousal benefits from your work record.

One final word of caution: should you decide to claim your own Social Security benefit before you reach your full retirement age next year, your eventual spousal benefit will be somewhat reduced. Waiting until you reach your FRA to apply for your own benefit will ensure you get the maximum spousal benefit you are entitled to when your husband switches to his own Social Security benefit at age

70. And at that time you will need to apply for your spousal benefit; it will not start automatically.