How does social security adjust monthly benefits for withheld excessive earnings upon reaching FRA? Is it based on remaining life expectancy or some other time period. For example, if I exceed the $15,720 by $10K a year from 62 until 66 (four years), SS will withold $20K. Is that $20K repaid in 216 installments (18 remaining years x 12 months/yr)? ) (In my case no spousal benefits, etc.).

Hi,

If a person files for reduced benefits prior to full retirement age (FRA), but does not receive some or all of their payments due to the earnings test (https://www.ssa.gov/planners/retire/whileworking2.html), Social Security adjusts the reduction in their benefit rate effective with the month they reach FRA to the percentage appropriate based on the number of months that they were actually paid prior to FRA.

The percentage reduction assessed for taking early retirement benefits is 5/9ths of 1% for the first 36 months of reduction, and 5/12ths of 1% for any months of reduction in excess of 36. So, say for example that a person files for reduced retirement benefits 36 months prior to full retirement age. The initial reduction in their benefit rate would be 20% (i.e. 5/9 x .001 x 36). Then say that they only end up being paid 18 months of reduced benefits because half of their payments are withheld due to the earnings test. Effective at FRA, the percentage reduction applied to their benefit rate would then be adjusted to 10% (i.e. 5/9 x .001 x 18).

To convert the above example into dollar figures, if this person's unreduced FRA benefit rate was $2000, they would start out with a reduced monthly benefit of $1600. Then effective at FRA, their monthly benefit amount would be adjusted to $1800.

I should note that the actual adjustments aren't made until well after a person reaches FRA. Generally, they are done about 12 to 18 months after FRA using an automated process. However, the person receives any appropriate back pay retroactive to the month they attained FRA.

Best, Jerry