I was an employee for 20 years and paid SS and medicare/medicaid. I am 59 and do not plan on retiring any time soon. My current projected SSA monthly benefit is $1800 at 67 and $2300 at 70. For the past 22 years I have been self-employed and not paid SS taxes or medicare. Questions: 1) Can I now pay the money I have NOT paid over the past 22 years without penalty? If I do pay for back years, will that increase my monthly benefit or will it remain where it is? Would it be better to add the money to my retirement account rather than the SSA?

Hi,

You can't pay Social Security taxes unless you earn covered wages or you report net earnings from self employment (NESE) on your tax returns, nor can you receive Social Security credits for NESE reported more than 3 years 3 months and 15 days after the end of a year. So, the farthest back that you could receive Social Security credits for your self employment would be the years 2016, 2017 and 2018, and only if you had NESE in those years. I'm not an expert on IRS regulations, so I can't tell you what late filing penalties might be involved.

If you only have 20 years with covered Social Security earnings then paying Social Security taxes in the form of self-employment taxes would raise your Social Security retirement benefits, but the amount of the increase would depend on the amount of your NESE. That's because Social Security retirement benefits are based on an average of a person's highest 35 years of wage-indexed earnings, so you'd be replacing zero earnings years that would otherwise drag down your average with at least some earnings. Our software (https://maximizemysocialsecurity.com) allows you to enter past and projected future earnings so that you can gauge the effect that the additional earnings would have on your benefit rate.

Best, Jerry