Will Social Security index business losses from 1970s in retirement calculation, or does zero always equal zero?

Social Security doesn't care about losses - only your reported earnings matter. If you had ZERO reported earnings, then that's what counts. Not -$15,000, just $0. That year will still be included in your calculation (they use 35 years), but as a zero. The indexing only applies to your positive earning years, not the zeros or losses. My brother tried to argue with SSA about his business losses back in the day and they basically laughed him out of the office! They just don't care about negative numbers, only what you paid FICA taxes on.

The previous comment is mostly correct, but I'd like to clarify a few things. Social Security benefits are based on your earnings that were subject to Social Security taxes. For self-employment, this means your net profit (not loss) from Schedule SE. When calculating your Primary Insurance Amount (PIA), SSA looks at your highest 35 years of earnings after indexing them for inflation. Years with no earnings (or losses) simply count as zeros in this calculation. The indexing formula applies only to years with positive earnings. So your loss year from the 1970s will simply be treated as a zero. If you have 35 or more years with positive earnings, that zero year won't affect your benefit calculation at all because SSA uses your highest 35 years. If you don't have 35 years of earnings, then that zero will be part of your calculation.

I had a business in the early 80s and also had losses. When I applied for Social Security last year, they didn't factor the negative earnings at all - just counted as $0 like others said. But one thing to consider: did you file tax returns for those years showing the business losses? The reason I ask is because if you DIDN'T file Schedule SE for those years (even with a loss), they might not even have those years in your earnings record at all. Might be worth checking your earnings statement on the mySocialSecurity website to see what they actually have recorded for those years. I was surprised to find some years in my work history completely missing because I hadn't filed properly!

im really confused by all of this. i thought SS just averaged your last 5 years of work??? why are ppl talking about 35 years? And does this mean my bad years when i only made like $8k working part time will pull down my SS payment???? ugh this is so frustrating i hate how complicated they make everything

Have you tried calling the Social Security office directly to ask about this? I spent WEEKS trying to get through to someone who could answer my complicated earnings question. The local office was booked 3 months out for appointments, and the 800 number kept disconnecting me after 2+ hours on hold. I finally used this service called Claimyr (claimyr.com) that got me through to a real person at SSA in under 20 minutes. They have a video demo showing how it works: https://youtu.be/Z-BRbJw3puU The agent I spoke with was able to pull up my entire earnings history and explain exactly how my self-employment years were calculated. Worth considering if you're struggling to get specific answers about your situation.

ZERO IS ZERO!! Doesn't matter if it was the 70s or yesterday! Social Security Administration ONLY cares about positive earnings that you PAID INTO the system through FICA or self-employment taxes. They don't give you "credit" for losses and they don't penalize you either. It's all about what you contributed to the system!!! Why would they count negative earnings when you didn't pay any SS tax on them??

my dad had a similar situation with his small business in the 60s and 70s. some years he made decent money, some years he lost money. when he retired in 1998 they just counted the years he made money and the loss years were zeros. his benefit was still pretty low because small business owners back then didn't always report all their income if you know what i mean lol. but anyway the losses didnt hurt him, they were just zeros.

wait i just realized something... since they index earnings from past years, wouldn't that mean that $15,000 loss from the 1970s would actually be like a $60,000 loss in today's dollars? does that matter at all for the calculation? or is it still just treated as zero regardless of the year and inflation?

I remember reading something about how self-employment losses could be carried forward for income tax purposes, but I'm pretty sure that has absolutely nothing to do with Social Security calculations. Like the others have said, for SS purposes, a loss year is just a zero - nothing more, nothing less. There are so many confusing details with Social Security. I've been retired for 2 years now and I'm still learning new things about how it all works!