Are Retirement Amounts Recalculated At FRA?

Q: Is there a review of your Social Security retirement amount once you reach full retirement age, even if you started benefits earlier?  For example, could earnings since you started Social Security increase the original amount? 

A: Starting reduced Social Security retirement benefits when younger than full retirement age (FRA) results in permanently reduced benefits. Your retirement amount will not increase just because you have gotten older, although you do receive cost-of-living increases.

However, two routine reviews can increase your original benefit amount. Both involve working while receiving Social Security retirement.  

First, when you reach full retirement age (FRA), there is a review of your existing benefits to be sure that all reductions for age applied. Benefits would increase for months that a person did not actually receive benefits because of work.  

For example, consider a person receiving Social Security retirement and working at the same time. If his or her earnings were low enough to permit ongoing payment of all monthly benefits, the review would not change the Social Security benefit because payment was received for all months. However, say earnings were high enough to prevent benefit payment for five months. Here the review at full retirement age would result in a benefit increase by the amount of those five months.  

A second review, also automatic, does not have to wait until full retirement age. Benefits are routinely reviewed to determine if earnings from new work activity can replace years previously used in computing a benefit amount. 

New and higher earnings on your record can replace one of the 35 years used to compute your original amount. When this happens, existing amounts are automatically recalculated and might increase benefits. Increases from this review can take place before full retirement age. This automatic review usually occurs in the fall, once employer W-2’s are all processed. For example, increases in benefits due to 2011 earnings were paid in November 2012, retroactive to January 2012. 

Other examples of these two reviews are in the booklet, How Work Affects Your Benefits, SSA publication 05-10069. Annual earnings test information for 2013 is also in this publication.