When Does Social Security Adjust Benefits Based on New Earnings?

I have a 69-year-old who began taking SS at 66. He is still working and making more money than ever before – $200,000 per year.  He’s made that kind of money since beginning SS.  At what point does SS adjust his deck of 35 highest income years?  I would have thought this would be every year, but he hasn’t seen an increase since beginning benefits, other than COLA.

Social Security Administration (SSA) reviews your client’s earnings each year to determine if his recent income should replace one of his 35 highest-earning years, potentially increasing his benefit amount. Here’s how the process works:

1. Annual Earnings Review:

   • Automatic Adjustment: SSA automatically reviews earnings each year. If your client’s new earnings are higher than one of his previous 35 highest-earning years, his benefit amount should increase. However, it's important to note that additional earnings don't always result in a benefit increase. This is because past earnings are indexed for inflation, and newer earnings may not replace older, indexed amounts.

2. Timing of Adjustments:

   • Processed Annually: If the new earnings result in a higher benefit, SSA typically processes this adjustment in October. They issue a one-time payment to cover the increase retroactive to January, with the higher monthly benefit beginning in November.
   • Checking for Increases: To verify whether any increases have been applied, your client can log into his Social Security online account and check under “Benefit and Payments.” If there’s a payment marked as a “One Time Payment,” this indicates an increase was made for the prior year’s earnings.

3. Why No Increase?

   • Indexed Earnings: Sometimes, despite high current earnings, they do not replace earlier years in the 35-year calculation due to the indexing of past earnings. As a result, his benefit amount may remain unchanged except for the usual Cost-of-Living Adjustments (COLA).

In summary, while SSA does review earnings annually, increases to benefits depend on how new earnings compare to indexed earnings from previous years. Checking his online account for “One Time Payments” can help him confirm if any adjustments have been made.

The content on this blog is for informational purposes only and is not legal, financial, or professional advice. Social Security rules change periodically, so some information may become outdated. For the most accurate advice, consult a certified National Social Security Advisor (NSSA®). Social Security Professionals, LLC, and NSSA® are not responsible for any errors, omissions, or actions taken based on this blog's content. Use of this blog does not create a client relationship, and all information is provided "as is" without guarantees. By using this blog, you agree to hold Social Security Professionals, LLC, and NSSA® harmless from any claims or liabilities arising from its content. For personalized guidance, contact an NSSA® professional.