Dear Rusty: 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? Signed: Working Senior
Dear Working Senior: 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%).
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). 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 (amacfoundation.org/programs/social-security-advisory) or email us at firstname.lastname@example.org.