# Ask Bob: How Does the Earnings Test Affect the Timing of Social Security Benefits?

A Retirement Daily reader has a question about Social Security benefits. A Retirement Daily expert has an answer.

### Question

I filed for Social Security at 65 years old in April, 2021. I'll be 66 years 4 months in August, 2022. I estimated my 2021 income at \$40,000. Was told my 1st check (\$2700-ish) would be delayed until September, 2021, for going over the earnings cap. I understand that. Trying to find the formula for when, over what time frame, those deferred recalculated monies will be returned.

There are two separate earnings tests, says Dr. Bill Reichenstein, head of research at Social Security Solutions, and a contributor to the development of www.SocialSecuritySolutions.com. “The first one applies to this reader whom I will call Terry who filed for his retirement benefits before the year he turns FRA.” He was born in April 1956 and has a full retirement age (FRA) of 66 years and four months.

“At age 65,” says Reichenstein, “Terry filed for his retirement benefits. Since this was 16 months before his FRA, his monthly benefit amount is 91.11% of his Primary Insurance Amount, where PIA denotes his benefit amount if he filed for benefits at his FRA. Since he filed for benefits 16 months before his FRA, his monthly benefit is 8.89% below his PIA—the reduction is 5/9% of PIA for each of these 16 months and 5/9% x 16 = 8.89%. Since he said his monthly benefit amount was \$2,700ish, I estimate his PIA at \$2,964 = \$2,700/0.9111.”

Since he applied for benefits before the year he reached his FRA, the earnings limit for 2021 is \$18,960. “The SSA (Social Security Administration) withholds \$1 of benefits for each \$2 of estimated earnings above this amount,” explains Reichenstein. “Since his estimated 2021 earned income is \$40,000, the SSA will withhold \$10,520 of estimated benefits in 2021, [(\$40,000 - \$18,960)/2]. To be more precise, since \$10,520/\$2,700 is between 3 and 4, the SSA withholds all benefits for the first four months.”

Reichenstein adds, “Since benefits for a month are always paid the next month, he will receive no benefits for April-July (that would have been paid in May-August), but he will receive his first benefit check of \$2,700 in September 2021. If his 2021 earned income turns out to be \$40,000, as estimated, then about August 2022, the SSA will send him a check for \$280, [(\$2,700 x 4) - \$10,520], since they would have withheld \$280 more than \$10,520.”

There is a separate earnings test in the year he turns FRA. “This earnings test,” Reichenstein says, “would withhold \$1 in benefits for each \$3 of earned income above \$50,520 (in 2021), but only earnings through August, the month before he turns FRA, count. I assume he will lose no benefits in 2022 due to this earnings test.”

At his FRA, his monthly benefit amount will increase to the amount if he began his benefits 12 months, instead of 16 months, before his FRA. “That is, since he lost all or partial benefits for four months, at his FRA his benefit amount is adjusted as if he began his benefits four months later than he did,” notes Reichenstein. “Based on a PIA of \$2,963, his monthly benefits will increase by about \$65.84 (before the COLA at the end of 2021). Thus, it will take about 160 months to recoup his lost benefits, [\$10,520/\$65.84 ≈ 160]. Therefore, he will have recouped his lost benefits due to the earnings test if he lives to age 79 and 8 months, [that is, 160 months past his FRA].”