SS Question -- Timing of PIA Calculation

[Former BH Lurker]

Hi All:
Well, I finally joined this group after years of lurking. (Not much of a joiner, I guess.) Does anyone know when SS recalculates one's PIA when, for example, this year's income will make 2019 one of the "top 35?" For example, within X days of the filing of a tax return? And, yes, I have consulted SSA.gov, Mike Piper's information and the internet. Tried calling SS, but the wait was an hour. Signed up for BH in a fraction of that time!
Many thanks in advance.

[LMBFlorida]

Following as I had this same question. Talking to the local SS office about this a while back and he said they recalculate once the year end info is available to SS. Not sure of that is days, weeks or months into the next year.

[Admiral]

Few weeks or months after end of calendar year as I recall. I don't think it's days.

Are you preparing to retire and waiting on this information? Just wondering why you need it...?

Welcome to the Forum!

[Mlm]

My 2017 earnings were updated in 01/19

[Former BH Lurker]

Why I am asking: I was born before 1954 and am able to claim spousal SS when my wife claims her own SS benefits. We are self-employed and have variable incomes. 2019 was a big year for her, which makes me think that her PIA will go up when her 2019 earnings are folded in. If we claim without that year being included, I fear that we will be leaving money on the table ... forever. I emailed the question to SS. If I get a clear answer, I will share it.

[One Ping]

Why I am asking: I was born before 1954 and am able to claim spousal SS when my wife claims her own SS benefits. We are self-employed and have variable incomes. 2019 was a big year for her, which makes me think that her PIA will go up when her 2019 earnings are folded in. If we claim without that year being included, I fear that we will be leaving money on the table ... forever. I emailed the question to SS. If I get a clear answer, I will share it.

IDK, but I believe, in a general sense, when your PIA is updated, your benefit is updated. If you had already started SS, and new earnings replaced one of your highest 35 years, your PIA is increased and your benefit increased accordingly. Don't know about the timeliness of this happening though.

I'd wait for Mike (ObliviousInvestor) to chime in to be sure, though.

[Former BH Lurker]

Well, it's not really an answer to my question but here is what the SSA says about how it updates Statements:

"... We have updated your record each time your employer (or you, if you’re self-employed) reported your earnings. ... Some or all of your earnings from last year may not be shown on your Statement. It could be that we still were processing last year’s earnings reports when your Statement was prepared. ... Your complete earnings for last year will be shown on next year’s Statement. ..."

So, I'll just assume SSA updates the PIA at some point after it receives information about earnings, presumably via a tax return. That means, we will wait before claiming our benefits. Thanks for your input.

[soccerrules]

Why I am asking: I was born before 1954 and am able to claim spousal SS when my wife claims her own SS benefits. We are self-employed and have variable incomes. 2019 was a big year for her, which makes me think that her PIA will go up when her 2019 earnings are folded in. If we claim without that year being included, I fear that we will be leaving money on the table ... forever. I emailed the question to SS. If I get a clear answer, I will share it.

IDK, but I believe, in a general sense, when your PIA is updated, your benefit is updated. If you had already started SS, and new earnings replaced one of your highest 35 years, your PIA is increased and your benefit increased accordingly. Don't know about the timeliness of this happening though.

I'd wait for Mike (ObliviousInvestor) to chime in to be sure, though.

I think this is correct as I have seen this in several other posts.

FYI It is likely that you are past the second bend point of which you would receive up to 50% of the 2019 earnings subject to SS tax, divided by 420 and times .15. In general for those past the 2nd bend point - $100K increase in indexed earnings = $50/mo for a combined FRA benefit ($35-36/mo) and 50% spousal-($17-18/mo)- the Spousal portion would be @ $17-18/mo.

[ObliviousInvestor]

Welcome, Former BH Lurker.

As One Ping noted above, when your spouse's PIA is updated to include the new earnings, your benefit as a spouse would be updated as well. Filing earlier (i.e., prior to the point at which your wife's earnings record reflects her new earnings) would not cause you to miss out on that in any way.

[ObliviousInvestor]

Also just adding: as far as the actual timing, I've never been able to find any official documentation about when Automatic Earnings Reappraisal Operation (AERO) actually occurs. But I've heard from several people that theirs has been processed in October, which would make sense as a time to do a batch processing because that's when extended tax returns have been filed.

As far as when earnings appear on the SSA website, my experience is that it depends on when the SSA gets the information. (For instance, my wife's earnings -- reported to SSA in January via a W-2 -- show up prior to mine, which the SSA finds out about in March/April whenever I file our 1040 for the year.)

But again, filing earlier wouldn't cause a person to miss out on the eventual update to their or their spouse's PIA for new earnings.

[wolf359]

Why I am asking: I was born before 1954 and am able to claim spousal SS when my wife claims her own SS benefits. We are self-employed and have variable incomes. 2019 was a big year for her, which makes me think that her PIA will go up when her 2019 earnings are folded in. If we claim without that year being included, I fear that we will be leaving money on the table ... forever. I emailed the question to SS. If I get a clear answer, I will share it.

There's a statement from Social Security that they check your earnings annually, and update the earnings retroactively. It shouldn't matter when you file -- you'll eventually get the correct amount.
Source: https://www.ssa.gov/planners/retire/whileworking.html

Each year we review the records for all working Social Security recipients. If your earnings for the prior year are higher than one of the years we used to compute your retirement benefit, we will recalculate your benefit amount. We pay the increase retroactive to January the year after you earned the money.

Of course, if you or she is still working, you should not claim because your benefit increases if you delay, by definition you do not need the money, and the excess income will be taxed. If you're simply asking about the timing of filing your claim, keep in mind that they generally take up to 6 weeks to process the information after you file, and may take up to 4 months, especially if they ask for additional information. Presumably they're updating the PIA calculations during this time. They may also adjust the payment retroactively as it's updated, generally annually.

[Former BH Lurker]

Everyone's input has been very helpful in our making our decision. As I understand it, my wife's benefit and my spousal benefit will not be "set in stone" based on her PIA as it appears in her SSA My Account summary but will be updated to reflect earnings for 2019. Would it get updated constantly if she continues to work?

Oblivious Investor: your SS calculator is wonderful! Thank you so much for creating and updating it. Think of it: you have helped complete strangers analyze how to make a decision that involves thousands and thousands of dollars. In addition to running various scenarios on your calculator, I read some of your articles, which are well written, easy to understand and don't go on too long. I assume your book is the same. I would have purchased it if I had not already purchased Get What's Yours, which I read and re-read to try to unravel the mysteries that the arcane SS rules present. Ultimately, it was your calculator and input from BHs, including yourself, that really helped.

Many thanks to all.

[ObliviousInvestor]

Everyone's input has been very helpful in our making our decision. As I understand it, my wife's benefit and my spousal benefit will not be "set in stone" based on her PIA as it appears in her SSA My Account summary but will be updated to reflect earnings for 2019. Would it get updated constantly if she continues to work?

Every time her PIA gets updated based on new work (the AERO process mentioned above), her monthly benefit and your benefit as her spouse will be updated. So, no, it is not "set in stone." I have a hard time calling a once-per-year process "constantly"...but yes, it gets updated.

[One Ping]

Every time her PIA gets updated based on new work (the AERO process mentioned above), her monthly benefit and your benefit as her spouse will be updated. So, no, it is not "set in stone." I have a hard time calling a once-per-year process "constantly"...but yes, it gets updated.

A process check question ...

Suppose someone is past FRA and working full-time in 2018 while collecting SS. Their wages for 2018 are sufficient to replace one of their top 35 years of SS earnings. Sometime during 2019 SS will become aware of this and update the top 35 years of earnings, resulting in an increased PIA and thus an increased SS benefit.

Is this increased benefit applied:
1) retroactively to the beginning of 2019?
2) at some (random?) time during 2019 when SS has finished updating the PIA with no retroactivity?
3) at the beginning of 2020 (i.e., incorporated with 1 year time lag)?

[HueyLD]

“You can work while you receive Social Security retirement (or survivors) benefits. When you do, it could mean a higher benefit for you in the future.

Each year we review the records for all working Social Security recipients. If your earnings for the prior year are higher than one of the years we used to compute your retirement benefit, we will recalculate your benefit amount. We pay the increase retroactive to January the year after you earned the money.”

https://www.ssa.gov/planners/retire/whileworking.html

[ObliviousInvestor]

Suppose someone is past FRA and working full-time in 2018 while collecting SS. Their wages for 2018 are sufficient to replace one of their top 35 years of SS earnings. Sometime during 2019 SS will become aware of this and update the top 35 years of earnings, resulting in an increased PIA and thus an increased SS benefit.

Is this increased benefit applied:
1) retroactively to the beginning of 2019?
2) at some (random?) time during 2019 when SS has finished updating the PIA with no retroactivity?
3) at the beginning of 2020 (i.e., incorporated with 1 year time lag)?

https://www.ssa.gov/OP_Home/cfr20/404/404-0282.htm

§ 404.282. Effective date of recomputations.
Most recomputations are effective beginning with January of the calendar year after the year in which the additional earnings used in the recomputation were paid. However, a recomputation to include earnings in the year of death (whether or not paid before death) is effective for the month of death. Additionally if you first became eligible for old-age or disability insurance benefits after 1985 and you later also become entitled to a monthly pension based on noncovered employment, we will recompute your primary insurance amount under the rules in § 404.213; this recomputed Social Security benefit amount is effective for the first month you are entitled to the pension. Finally, if your primary insurance amount was affected by your entitlement to a pension, we will recompute the amount to disregard the pension, effective with the month of your death.

[One Ping]

Suppose someone is past FRA and working full-time in 2018 while collecting SS. Their wages for 2018 are sufficient to replace one of their top 35 years of SS earnings. Sometime during 2019 SS will become aware of this and update the top 35 years of earnings, resulting in an increased PIA and thus an increased SS benefit.

Is this increased benefit applied:
1) retroactively to the beginning of 2019?
2) at some (random?) time during 2019 when SS has finished updating the PIA with no retroactivity?
3) at the beginning of 2020 (i.e., incorporated with 1 year time lag)?

https://www.ssa.gov/OP_Home/cfr20/404/404-0282.htm

§ 404.282. Effective date of recomputations.
Most recomputations are effective beginning with January of the calendar year after the year in which the additional earnings used in the recomputation were paid. However, a recomputation to include earnings in the year of death (whether or not paid before death) is effective for the month of death. Additionally if you first became eligible for old-age or disability insurance benefits after 1985 and you later also become entitled to a monthly pension based on noncovered employment, we will recompute your primary insurance amount under the rules in § 404.213; this recomputed Social Security benefit amount is effective for the first month you are entitled to the pension. Finally, if your primary insurance amount was affected by your entitlement to a pension, we will recompute the amount to disregard the pension, effective with the month of your death.

In my hypothetical above, the additional earnings used in the recomputation were paid in 2018. From the highlighted text above, "recomputations are effective with January of the calendar year after the year the wages were paid", which would be January 2019.

So, after the recomputation was done (some time in mid- to late-2019-ish), the increased benefit would applied retroactively starting with the January 2019 benefit payment, right? [just like HueyLD mentioned. ]

Presumably the difference in the accumulated increased monthly benefits would appear as an 'extra' amount in a SS deposit at some point in late-ish 2019.

[ObliviousInvestor]

Yes, that's correct. Retroactive application, with the additional lump sum being included in the next check/deposit after it gets processed.

[TBillT]

The other thing soon we get the 2020 COLA adjustment, I am thinking est. to be 1.8% this year.
I found the ANYPIA tool to be very useful checking the PIA calc basis, which I had questions about, and more clear about what COLA adjustments were added.

[Former BH Lurker]

HueyLD, thanks for pinpointing the relevant info on the SSA website. Clearly, your research skills exceed mine!