Top 35 earning years basis for Social Security benefits

December 02, 2010|By Janet Kidd Stewart, Tribune Newspapers

Q I'm a 62-year-old business owner and have contributed to Social Security at the maximum rate for the last 19 years. My last benefit statement indicated that my monthly benefits at age 66 would be $2,423 per month. Now I have an option to reduce my hours, and therefore my earnings, rather than fully retire. I'm considering doing this for a few years until my wife also reaches retirement age. If I work another two years at the maximum rate, then work a few years at about 75 percent of the maximum rate, will that diminish the value of earning the maximum for so long?

A Your benefits are calculated based on your highest 35 years of earnings, not your last 35 years of work. So if you have 20 years at the maximum rate, the remaining 15 will come from the years in which you earned the next-highest amounts. If you downshift and work less before retirement, it will only work into the benefit calculation if those years are within your highest 35. And remember that if you end up delaying the start of your benefits to age 70, you can increase that projected monthly amount significantly.

If you feel you'll live longer than average, this may be a strategy to consider. Meanwhile, start exploring scenarios for claiming spousal benefits.

Q I'm confused about how my Social Security benefits will be affected by the earnings test and the windfall elimination provision. I receive a fire department disability pension of $3,828 a month. I recently applied for Social Security benefits, which are reduced by the windfall provision because of the pension. Now, my wife is considering applying for her reduced benefits at 62 while continuing to work. We understood she could "apply and suspend" her benefits and request a spousal benefit instead. We also thought that if she has 30 years of work service under Social Security, she wouldn't have her benefits reduced for earnings above a certain level. Now we're hearing conflicting information.

A First, you can't use the apply-and-suspend strategy until full retirement age, said Trish Nicasio, a spokeswoman for the Social Security Administration. Next, the 30 years of work service applies to the windfall elimination period, not the cap on earnings that reduces benefits by $1 for every $2 earned above $14,160 (this year and next) for workers younger than full retirement age. In the year you turn full retirement age, benefits are reduced by $1 for every $3 earned above $37,680, but only for the months before you turn full retirement age. To sort out WEP issues, visit and

Q I retired in 2007. I was married 91/2 years, then separated for 18 months and was divorced. Does the 18 months count toward the 10-year marriage requirement for collecting spousal benefits?

A Yes, it does, said Nicasio. The clock starts running the day you are married and ends with the date of the divorce decree, she said. For other requirements on collecting spousal benefits on your ex's record, visit

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Money glossary

Windfall elimination provision: This affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower benefit than you otherwise would receive.

Spousal benefit: A married person, even one who has never paid into Social Security, can receive beginning at full retirement age as much as half of a spouse's Social Security benefit. Visit

Apply and suspend: One spouse files for benefits at full retirement age. This entitles the other spouse, provided that he or she is eligible for benefits, to start receiving the spousal benefit if it's higher than his or her own benefit. The spouse who files then suspends his or her benefit and reapplies for enhanced benefits at age 70.

SOURCE: Social Security Administration