Is income after 62 included when social security calculates my PIA?


Today’s Social Security column addresses questions about how income earned after prior income is indexed to 62% inflation and affects how benefit rates are calculated, recalculating WEP reductions. due to the substantial covered income and maximum family benefits. Larry Kotlikoff is Professor of Economics at Boston University and Founder and Chairman of Economic Security Planning, Inc.

See more Ask Larry answers here.

Do you have social security questions yourself that you would like to answer? Ask Larry about Social Security here.

Is income after 62 included when social security calculates my PIA?

Hello Larry, I have done a lot of research online and I cannot find an answer to this question. I read that you take the top 35 years of income that goes into the AIME number which is then applied to the fold point formula to come up with your PIA at 62.

Then after 62 years, the PIA is only adjusted by the COLAs as for the beneficiaries. Then, once the PIA is adjusted by COLA, your rate is decreased or increased depending on when you claim relative to full retirement age.

I have also read that if you have earned income that is in your top 35 earning years after 62 it would change your AIME which could change your PIA.

I haven’t found anything that explains how the AIP would be determined if, say, at 63 and 64 I have an income that is in my prime 35 years. Would years of income earned after 62 change the AIME that goes into the PIA formula?

How are COLAs taken into account? Thanks, Jimmy

Hi Jimmy, Yes, income for the year a person turns 63 and 64, and income for any other year for that matter, can be included in their best 35 years of income and used to calculate their benefit rate. social security pension.

A person’s primary insurance amount (PIA), which can first be calculated accurately from the year they turn 62, is the amount they would receive if they started receiving their benefits. social security retirement the month she reaches full retirement age (FRA).

Social Security retirement benefit rates are based on an average of a person’s highest 35 years of earnings indexed to Social Security covered wages. Indexation converts a person’s historical annual income into amounts more representative of today’s dollars. For example, a person born in 1959 who earned $ 20,000 in 1991 would see those 1991 earnings indexed to an amount close to $ 50,000 when calculating their Social Security retirement benefit rate.

The reason why a person’s AIP for retirement benefits cannot be calculated until the year they turn 62 is that their previous annual earnings must be indexed based on the Average Earnings Index (AWI ) of the year in which she turns 60.

And these AWI amounts are only available shortly before the year a person turns 62. Thus, AIPs and benefit rates for people turning 62 after 2021 can only be estimated at this time. The basic AIP calculated when a person turns 62 can be recalculated after any subsequent year in which they earn more than they did in one of their previous 35 years of index-indexed earnings. wages.

And any increases in the Social Security cost of living (COLA) that occur after a person turns 62 are added to their basic PIA, whether or not the person has started receiving benefits. Best, Larry

Will Social Security recalculate my WEP reduction if I have years of additional substantial income?

Hello Larry, I am WEP subject and a retired art teacher. I have 21 years of substantial covered income.

I want to start my Social Security retirement benefits soon when I turn 68. I will continue to report substantial income for another two or three years. Will SSA recalculate my additional years with substantial covered earnings or do I have to ask them to do so?

I know they will recalculate for a new PIA if necessary. I understand that SSA performs its recalculations so that they are effective in January of each year. Thanks Charles

Hi Charles, The short answer is yes. Social Security automatically recalculates Social Security retirement benefit rates to account for both additional income years and additional substantial income years for the purposes of the Windfall Elimination Provision (WEP).

It appears that the increases in your benefit rate that would result from additional years of earnings would be twofold. Social security retirement benefits are calculated on the basis of an average of the highest 35 years of income covered by social security indexed to a person’s wages.

And in addition to this increase, if you have additional earning years that are defined as substantial for the purposes of the WEP provision and if you currently have between 20 and 30 of those years, then the WEP reduction amount applied to your rate. benefit would likely decrease by 5% for every additional substantial year up to age 30. If you reach 30 years of substantial income covered by Social Security, no WEP reduction will apply.

The only way that an extra year of substantial income covered by Social Security does not increase your benefit rate if you currently have between 20 and 30 years of substantial income is if your WEP reduction amount is calculated. based on the WEP warranty provision.

The WEP guarantee provision limits the amount of the WEP reduction to a maximum of 50% of the total amount of a person’s uncovered pension. WEP coverage normally only applies if a person’s monthly uncovered pension amount is less than approximately $ 800.

Ultimately, both types of increases described above should be done automatically without any action on your part. However, these recalculations are not processed immediately. Social Security typically processes these types of recalculations in the fall of the year following the extra year of earnings, but any resulting rate increases are retroactive to the person’s payment for the month of January of that year.

You may consider using my company’s software – Maximize My Social Security or MaxiFi Planner – to fully analyze your options so that you can make informed decisions on your best strategy to maximize your benefits and avoid leaving money on. the table without knowing it. Social Security calculators provided by other companies or nonprofits may provide suitable suggestions if they have been constructed with extreme care. Best, Larry

Why didn’t my daughter’s benefit rate increase when her older brother turned 18?

Hello Larry, I wonder why my daughter’s survivor benefits didn’t increase when her sister turned 18. When my oldest turned 18, my two other children’s benefits increased. The amount they raised made it seem like they were getting the oldest child’s check shared between them.

My daughter is the youngest and now the only one to collect, but why didn’t she increase when the middle child turned 18? Thanks, Howard

Hello Howard, The maximum rate at which a surviving child can be paid is equal to 75% of the amount of primary insurance (PIA) of the deceased worker. Up to two surviving children can still receive their full maximum benefit rate if they are the only survivors receiving benefits on a deceased worker’s file.

So, assuming your daughter and her older brother were the only two survivors to receive benefits, the younger child’s benefit rate did not increase when the older brother stopped receiving benefits because the younger child was already receiving his maximum benefit rate of 75% of the deceased worker’s PIA.

The only time the surviving child benefit amount is reduced to less than 75% of the worker’s PRA is if there are more than two eligible children, or at least two eligible children plus a surviving spouse receiving benefits. benefits. In this case, they must split the maximum family allowance (FMB)

amount that can be paid out of the worker’s file.

BKW can represent between 150% of the PIA of the deceased worker and 187% of the PIA of the deceased worker. As a result, benefit rates for the remaining eligible survivors can sometimes increase when another beneficiary stops receiving benefits. But when only two children receive survivor benefits, there is no increase in the rate for the younger child when the older child stops receiving benefits. Best, Larry

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