If you continue to work after full retirement age (66) while collecting your Social Security benefits, is your AIME recalculated to include earnings each year that you continue to work?

If you continue to work after full retirement age (66) while collecting your Social Security benefits, is your AIME recalculated to include earnings each year that you continue to work?

Answer: Yes. Every year you work can, potentially, raise your Social Security benefits. If, for example, you could keep working to age 100, your Average Indexed Monthly Earnings (AIME) that’s plugged into Social Security’s Primary Insurance Amount (PIA) formula to calculate your retirement will be recomputed each year right up through age 100.

As I described in “How Social Security Pays You to Work Forever,” if your earnings remain above Social Security’s ceiling on taxable earnings, your AIME, and thus your PIA, will rise every year.

As a result, all the beneficiaries from your work record — your own retirement benefit, the spousal benefits of your current and any ex-spouses (if you were married for 10 or more years to them), your children if they are young (under age 16) or disabled (having first been disabled before age 22), as well as your survivors when you die — will receive higher benefits. In addition, the family benefit maximum, which depends on your PIA, will go up.

So keep earning those big bucks! But, if you are earning small bucks, contributing to Social Security may not mean any higher benefits because even though your AIME is still recomputed, it may not change because your prior 35 years of highest indexed annual earnings remain the same 35 years.

The best way to sort out what more you’ll get back from Social Security (in terms of higher benefits) as a result of working longer is to run yourself through a careful Social Security software program where you can plug in your projected future covered earnings.

From Forbes

David Wingate is an elder law attorney, practicing in Frederick and Montgomery Counties, Maryland. David Wingate’s focus is Medical Assistance (Medicaid), Asset Protection and Estate Planning.