Ask Larry: Why Are My Estimated Social Security Retirement Benefits Going Down?

Today’s Social Security column addresses questions about why Social Security’s estimates of future retirement benefits may fluctuate, requesting that a benefit rate be recalculated and how rates might increase even after 70. 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.

Why Are My Estimated Social Security Retirement Benefits Going Down?

Hi Larry, My plan is to defer my Social Security retirement benefits until 70. I turned 67 in October and retired just before the pandemic hit in early 2020. My estimated benefits are going down. Why is this?

How do I freeze my earnings record? I want my estimated benefits to be based on my last five year earnings. Would it be possible to file and suspend benefits in order to freeze my earnings record? Thanks, Daniel

Hi Daniel, Your estimated benefit may have gone down, but that doesn’t mean that your actual benefit rate did. My guess is that your previous estimated benefit rate was based in part on expected future earnings that didn’t materialize because you stopped working.

You can’t freeze your earnings record, nor would it make any difference in your benefit rate if you could. And filing for and suspending your benefits wouldn’t cause you to get a higher benefit rate than if you simply wait until 70 to claim your benefits.

All Social Security retirement benefit rates are calculated based on an average of the person’s highest 35 years of Social Security covered wage-indexed earnings, not five years or 10 years, which are common misconceptions.

Your benefit rate won’t go down because you’ve stopped working, it simply won’t increase like it might have had you continued working and earned enough to replace one or more your previous highest 35 years of earnings used to determine your actual benefit rate. You may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to fully analyze your options.

It will accurately calculate future benefit rates based on past and current earnings along with your best estimate of future earnings so you can make informed decisions about your best strategy for maximizing your benefits and avoid unknowingly leaving money on the table. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry

Can I Ask That My Benefit Be Recalculated?

Hi Larry, My Social Security rate was calculated in a rush because of an injury and I was placed on SSDI. I suspect it was not calculated correctly. Can I asked that it be recalculated? How do I know it was calculated correctly? Thanks, Evan

Hi Evan, Virtually all Social Security retirement and disability (SSDI) benefits are calculated using Social Security’s automated computer system. So unless there are earnings missing from your earnings history, it’s extremely unlikely that your benefit rate was calculated incorrectly.

However, if you believe that there are earnings missing from your record or if you have another reason for believing that your benefit rate was miscalculated, then you could either file an appeal request or a request for a manual recalculation.

Appeal requests must normally be requested within 60 days of the determination you’re appealing. If you’re past that timeframe, you can submit a form SSA-795 to Social Security requesting that your benefit rate be recomputed and listing the reasons why you believe the calculation is wrong.

You should also submit any pertinent evidence (e.g. proof of earnings that you think weren’t considered, etc.) that you want them to consider. Best, Larry

Will My Benefit Rate Go Up Now That I’m 75 And Ready To Retire?

Hi Larry, I took early Social Security retirement benefits at 62 but kept on working part time. I’m now 75 and ready to retire from part time job which was 30 hours a week. Will my Social Security go up when I do? Thanks, Mary

Hi Mary, Your benefit rate wouldn’t go up as a result of your retiring, but it could potentially increase if you’ve earned enough recently. Social Security retirement benefits are based on an average of a person’s highest 35 years of Social Security covered wage-indexed earnings.

Your additional years of earnings would only increase your benefit rate if they’re higher than one or more of the 35 years currently being used to calculate your benefit rate.

Social Security automatically recomputes benefit rates to consider any additional Social Security covered earnings that a person produces after claiming benefits. If your earnings since you filed for benefits have been high enough to increase your benefit rate then your benefit amount should have already been increased.

But Social Security almost certainly hasn’t yet recalculated benefits to consider earnings from 2020 and 2021 yet, so it’s at least possible that you still may be due an increase based on your earnings in those years. Best, Larry