You may have clients who wonder how they may boost their Social Security benefit. Here’s one way: Keep working. Our expert runs through some numbers, showing how some clients may benefit by continuing to work.
Clients who understand the connection between earnings and benefits often ask how their benefit will be affected if they keep working. In particular, they wonder if claiming their benefit locks in the amount (except for annual COLAs), or will their earnings record continue to be updated resulting in a possible benefit increase?
The short answer is that as long as they work and pay FICA taxes their earnings will be recorded and their primary insurance amount (PIA) will be refigured. If the latest earnings cause an earlier year of lower earnings to drop off the 35-year earnings record used to figure the PIA, the benefit will go up. If not, there will be no change in the benefit amount. This process happens even after benefits have started and usually takes place in October, retroactive to January.
An example: Boomer Bob
Let’s take Boomer Bob, a maximum earner who turned 62 in 2024. His PIA was officially calculated in 2024 based on his highest 35 years of earnings through 2023. Bob actually has 40 years of earnings on his record, but only the 35 highest earnings will be used. His average indexed monthly earnings (AIME) will be $13,100 and his PIA will be $3,849. This is the monthly amount he’ll receive if he claims his benefit at his full retirement age of 67, not counting COLAs or future earnings.
If Bob works in 2025, these earnings will be added to his earnings record. Now he’ll have 41 years of earnings but again, only the highest 35 years of earnings will count. If he earns at least $168,600 (the maximum wage base for 2024), this will be his highest year of earnings, so one of the earlier years ($151,181) will drop off. If he keeps working to age 70, and if the wage base rises by 3% a year, he will keep replacing lower earnings with higher earnings.
“But let’s not lose sight of the bigger picture: Earnings of any amount contribute to a client’s financial well-being.”
By the time he turns 70 his new AIME will be $14,865 and his new PIA will be $4,113. This does not include COLAs or delayed credits; it is simply the PIA that will be used to calculate his benefit and any auxiliary benefits paid off his record.
So, by working another eight years, he can add $264 to his monthly benefit amount, or $3,168 a year. If COLAs average 2% between now and then his PIA at 70 will be $4,889. Adding three years of 8% annual delayed credits on top of this will give Bob an age-70 benefit of $6,062. If he continues to work at maximum earnings after claiming, his earnings record will continue to be updated and his benefit can keep going up, in addition to the annual COLAs.
Impact of lower pay?
What if Bob keeps working but at lower pay? Will this cause his PIA to be reduced? No. Once the PIA is calculated at age 62 it can never go down.
But here’s the thing: The PIA as officially calculated at 62 does not appear on the statement. Bob doesn’t even know what his actual PIA is. What he sees on the statement is an estimate of his future benefit based on the PIA, adjusted for future earnings.
Although Bob’s PIA calculated out at $3,849 at age 62, his age-70 benefit estimate will presume a PIA of $4,113—because it incorporates those presumed earnings—plus the three years of 8% annual delayed credits. (SSA estimates do not include COLAs.)
We say that Bob can increase his PIA by continuing to work, but based on the numbers Bob is seeing, a better way to put it is that he’ll reduce his PIA if he does NOT work until claiming age.
Some people have complained that it is not fair to collect FICA taxes on people over age 70 since it is common to slow down at this stage of life. If people over 70 continue to work, it may be part-time, which means they are not replacing any of the earnings on their 35-year record. Their return on “investment” of those FICA taxes is zero.
While there have been proposals to stop collecting FICA taxes on people over 70, they have not gained any traction when the priority now is to raise more money for the Social Security trust fund, not less.
But let’s not lose sight of the bigger picture: Earnings of any amount contribute to a client’s financial well-being. The impact on Social Security is just one part of it.
