Today’s column addresses questions about recalculation of benefits after earning continuing income, how the family maximum that can be claimed on a single record is calculated and how divorced spousal benefits are calculated for business owners. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
When Will My Social Security Retirement Benefit Be Recalculated?
Hi Larry, In March of 2018 and 2019, SSA recalculated my monthly benefit due to an increase in earnings. I had a minimal work experience, so those years increased my monthly benefit. My income increase for 2020 was about three times that of 2018 2019 but, to date, I have not received an increase in monthly benefit. Someone told me that they review earnings in March and December, but everything I read says they review when they receive reported income for the year, in my case from my employer. Any ideas what’s going on? Thanks, Paul
Hi Paul, Most commonly, the automated process that Social Security uses to recalculate benefits for people who had earnings in the previous year is run in late July or August, and any increases are reflected in their benefit payment in September. I don’t know whether or not that schedule will hold this year given Social Security’s COVID related backlogs, so I guess we’ll need to wait and see.
I don’t know how or why your benefits were recomputed in March in past years, but I don’t think that could have resulted from the normal automated process. Social Security can do manual recomputations if a person submits a written and signed request, and that’s the only way that I know of to get your benefit rate recalculated any sooner than the normal July-August cycle. Best, Larry
Did Social Security Calculate My Family’s Benefits Correctly?
Hi Larry, My retirement benefit is about $2,250 after filing at 62. I have two kids, 9 and 14y. They get about $1,120 each. My wife applied for spousal benefits and now SSA says that the kids’ benefits are reduced to about $750. And my wife’s benefit will also be $746. Did they do this right? Thanks, Aaron
Hi Aaron, Yes, it sounds like it. There is a family maximum benefit (FMB)
FMB
limit on the amount that can be paid from any person’s Social Security record. Apparently the FMB limit in your case allows up to about $2,250 to be paid to eligible family members each month in addition to your own benefit. If just your two children were drawing benefits they would split the $2,238 split two ways, but with your wife also eligible, the available FMB amount must be split three ways.
Individually, your children or spouse could be paid up to 50% of your primary insurance amount (PIA), and your PIA is equal to your unreduced full retirement age (FRA) rate. But if more than one family member is eligible for benefits on your record, they can’t be paid their full rate without going over the FMB. Best, Larry
Why Is My Ex-Husband Getting So Much More Than Me Even Though I Helped Out In Our Businesses?
Hi Larry, I was married for 23 years and am now divorced. My husband owned several businesses where I helped. Now I look at my Social Security statement and he is getting highest amount at every age level. Me? I am getting only small amounts at every age level. Throughout this marriage, I worked as little as possible so I could help out our business. We both have worked always since we were 18. Why is my amount so much less?? We filed jointly for all those years. Thanks, Angelica
Hi Angelica, Most husband and wife businesses report their earnings as sole proprietorships. What that means is that the main owner operator of the business pays the Social Security taxes and gets all of the Social Security earnings credits for profits from the business. It doesn’t matter whether or not you file your taxes jointly as far as Social Security is concerned. All earnings credits from a sole proprietorship go to the member of the couple whose Social Security number is listed on Schedule SE of their federal tax return.
It is possible to retroactively move the earnings credits from a joint business from one spouse’s Social Security earnings record to the earnings record of the other spouse, but only if the business operated in effect as a partnership. To accomplish that though, your ex would almost certainly need to agree to the change. Furthermore, shifting earnings credits from your husband’s record to your record could adversely affect any divorced spousal or survivor benefits for which you may qualify for now or in the future. Best, Larry