My wife’s birthday is 10/21/1955. She is a dental hygienist. She broke her back in January and had three surgeries in February. She previous to this earns approximately $70k a year. We considering starting her SSA benefits which would be approximately $2800 per month. I retired 3 yrs ago and started my SSA benefits when I turned 66 last year and receive $2,160 a month plus my pension plus work part time as a school bus driver. I understand about the earnings test and that for my wife (70,000-50,520 divided by 3 divided by 12) $540 approximately withheld each month. So if we applied for her SSA benefits how is it calculated at her FRA?

Hi. Actually, it sounds like you might not fully understand how the earnings test works. If a person earns more than the Social Security earnings test exempt amount, Social Security withholds the person's full monthly benefits for as long as it takes to withhold the required amount. They don't prorate the amount to be withheld into a monthly rate.

For example, say Sue files for her Social Security retirement benefits effective with March 2021. Sue was born in October 1955, so she'll reach her full retirement age (FRA) effective December 2021 (i.e. age 66 & 2 months). Sue will continue working and will earn a total of $70,000 in 2021, but Social Security will only count the amount that Sue earns from January through November. There is no limit on how much Sue could earn and still be paid all of her benefits starting with her FRA of December 2021.

Let's say Sue's 2021 earnings through November will be $66,480, which is more than the $50,520 that is exempt under the earnings test for people reaching FRA in 2021. Sue's excess earnings would then be $15,960, and Social Security would need to withhold $5,320 of Sue's benefits (i.e. $1 of benefits for each $3 of Sue's excess earnings). Sue's primary insurance amount (PIA), which is what she would be paid if she started drawing at FRA, would be $2800. However, Sue's reduced rate for claiming her benefits 9 months early in March 2021 is $2660. In order to withhold the $5,320 of Sue's benefits required by her earnings, Social Security would withhold Sue's full benefit payments for March & April of 2021 (i.e. 2 x $2660 = $5320). Sue would then be paid her full reduced benefit rate of $2660 for May 2021-on.

After Sue reaches FRA, Social Security would adjust her permanent benefit rate to remove the percentage reduction previously applied for any months that Sue's benefits were withheld due to the earnings test. Since 2 months of Sue's benefits were withheld prior to her FRA, her benefit rate would then be adjusted from $2660 to $2691. In other words, Sue's benefit rate would only be permanently reduced for the 7 months that she was actually paid benefits prior to her FRA.

I should point out that if your wife files for her benefits early, it will limit the amount that you could be paid as a survivor if she dies before you. If your wife dies before you, you could be paid up to the higher of your own benefit rate or her benefit rate. Therefore, if your wife's rate is reduced for starting her benefits early, that reduction would carry over to your potential benefit rate as a widower. It sounds like you and your wife may want to strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully analyze your options so that you can choose the best possible strategy for maximizing your benefits.

Best, Jerry