SLEDGE: My earnings don’t give me additional benefits

Ned Sledge is a Social Security Public Affairs Specialist in Richmond. Questions about Social Security issues may be directed to him by e-mailing .
Published: November 26, 2008

Q: I am a 73 year old male who “retired” at the age of 62 and started drawing my Social Security benefits. I actually never ceased working and even at the present time I am making better than $40,000 per year. Over the past 11 years, I have paid right back into the system but I have never seen an increase in my benefits than the cost of living raises. Even this year I have already paid back into the Social Security program some $2000 and this has been going on for some 11 years, yet I see no increase in my benefit check. Could you tell me why?
My wife basically has done the same as me and she has received several increases in her Social Security check. — James N.
A: In other words, you’ve been continuing to work and pay Social Security taxes since becoming entitled to retirement benefits, and yet you’ve never seen that this has led to an increase in your benefit amount. Your wife, on the other hand, has also worked since her entitlement to retirement benefits, and her additional earnings have increased her benefit payment. Why hers and not yours?
In a recent column, I mentioned that Social Security retirement benefits are based on an average of your 35 best years of earnings, after those past earnings have been adjusted for inflation. So picture 35 poker chips, each one worth what you had earned in one of your best 35 years. And imagine those chips in one tall stack, with the chip of greatest value on the bottom and the one worth the least on the top. Social Security computes your retirement benefit on an average derived from the the total of all 35 chips — in other words, of the “pot” — and starts paying you your benefits.
But you kept working while getting those benefits. Beginning with your full retirement age, in fact, you can earn any amount of money and still get your full check, unreduced by your earnings. And of course, while you’re working you’re paying Social Security tax on those earnings. In due time the work year ends, and the following year the money you made appears on your Social Security work record. Now when additional earnings are posted to the record of an active beneficiary, the computer automatically refigures the benefit to see if it will be increased by those new earnings. What the computer is doing, really, is looking to see if the new “poker chip” is greater in value than the top chip currently on the stack — in other words, if those new earnings exceed the lowest year previously used in the computation. If so, the new chip replaces the former one, which increases the total of the “pot,” which means that the benefit will now be based on a higher average than before. And since the average of the best 35 years has now increased, the benefit increases.
So, since your additional earnings have not led to a benefit increase, the conclusion is that those new earnings were never high enough to knock out the top chip and take its place. Remember that the old chip was increased for inflation — “indexed,” we call it — so its value will be considerably more than what you’d actually earned that year. Your wife’s additional years of earnings, on the other hand, were sufficient to replace what had previously been the lowest chip on her stack — and so her benefit went up.