Q & A
What is the special rule about earnings in the first year of retirement?
Answer: Sometimes people younger than full retirement age retire in the middle of the year and have already earned more than the yearly earnings limit. There is a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can get a full Social Security benefit for any whole month you are retired, regardless of your yearly earnings.
See Retirement Planner Special Earnings Test Rule for more information.
Source: Social Security
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Hi, my retirement date was April 30th, 2023, at 62. I started receiving social security benefits as of July 2023. I have not worked since I retired. My pay through April 30th exceeded the annual maximum. It is my understanding that the Special Rule on the first year of income would apply. Unfortunately, the SSA has decided that they have overpaid me and have suspended all payments until further notice. The notice they sent me does not have any concrete reason, just their “determination”. I’m uncertain why they have taken this action and will be filing a Request for Reconsideration in person. Perhaps I have missed some element of the SSA process. Do you have any advice or additional information on the Special Rule? Thank you.
Kevin,
If your SS benefits started in July of 2023 and you no longer had earnings thereafter, then you should not be subject to any penalty for exceeding the annual earnings limit. Income earned before your SS benefits started doesn’t count towards the earnings limit. In the interest of timeliness (you only have 60 days to appeal a determination), I suggest you call Social Security and submit a verbal Request for Reconsideration, and follow that with a mailed or personally delivered copy of form SSA-561. Social Security’s “First Year Rule” does, indeed, apply, which means that only your income earned in the 2023 months following July 2023 should count. Their initial determination will likely be quickly reversed, and you should get any withheld benefits returned.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I will turn 66 in September of 2024. If is start my SS in December of 2024, I know I’m subject to the earnings test of $1750. January will start the year I reach full retirement, will I be subject to the annual of 57,500 or monthly earnings limit of 4,750. I plan to retire in March of 2025 and I will receive around $25,000 final check. Question is should I start SS in November of 2024 so January is considered as a new year with the annual limit
Michael,
If you will be 66 in September 2024, you will reach your full retirement age (FRA) in May 2025. If you claim for your benefits to start in December 2024, your earnings limit for that month will be 1/12 of the 2024 annual limit which hasn’t yet been published. However, your 2024 annual limit will be slightly more than the 2023 limit of $21,240 which yields a monthly limit of $1,770. So, you can anticipate that your earnings limit for the month of December 2024 will be something a bit more than $1,800. If your December earnings exceed the 2024 monthly limit you won’t be entitled to benefits for December. The same is true if you start your benefits in November 2024 – the 2024 monthly limit of approximately $1,800 will apply. Then, starting in January 2025 and until you reach your FRA, only the 2025 annual limit (something more than the 2023 limit of $57,520) would apply.
If you start your benefits in 2024 only the annual limit (something more than the 2023 limit of $57,520 for those attaining FRA in that year) will apply in 2025, but you will likely lose benefits received in 2024 because you will exceed the 2024 monthly limit after your benefits start. If you, instead, claim your benefits to start in January 2025, and you retire from work in March 2025, you likely won’t exceed the 2025 annual earnings limit (which will be over $57,520). Although the 2025 monthly limit might apply for January through March 2025 (because that would be your first year collecting), Social Security will use the annual limit, instead of the monthly limit, to see if a penalty applies. Social Security always uses the method which will result in the smallest penalty when evaluating your earnings compared to the earnings limit, so even though you might exceed the 2025 monthly limit in January, February and March, because your total 2025 earnings won’t exceed the 2025 annual limit (of over $57,000) you won’t lose any benefits for 2025. The key point is that Social Security will use which ever method is most favorable to you, the annual limit or the monthly limit, and in the scenario you describe – reaching FRA and retiring from work in early 2025 – your best move would be to claim benefits to start in January 2025 at the earliest.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
If you just filed for social security benefits. How would you get in tough with social security to let them know that you what to use the yearly rule of you can’t go over 21,240 instead using the monthly one that you can’t go over 1,770 a month.
Darlene,
You do not need to contact Social Security to request they use the annual limit when reviewing your earnings during your first year collecting. Social Security will automatically use the method which results in the lowest penalty – either the monthly limit, or the annual limit. If you exceed the monthly limit during the remainder of your first year collecting, the penalty is loss of all benefits for that month; but if using that methodology results in a penalty greater than using the annual limit, they will, instead, use the annual limit and assess a penalty of $1 for every $2 you are over the limit. You will get an Overpayment Notice the following year (after the IRS provides SSA with your earnings info) and require you to repay the penalty amount (either in a lump sum, or by withholding future benefits until they recover what is owed). If you know you will exceed the limit in certain months after your benefits start, you can call Social Security (1.800.772.1213) to inform them, and they will withhold your benefits in advance for those months, thus avoiding the Overpayment Notice the following year.
You may be interested to know that if you have benefits withheld for any number of months while collecting SS early, when you later reach your full retirement age Social Security will give you time credit for any months you didn’t receive benefits, thus increasing your monthly amount slightly at your full retirement age.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I will stop working full time on June 3, 2022 and my gross earnings will be below the limit of $19,560. It is my understanding that commencing with SS in July 2022 will allow me to earn $1,630 monthly with out being penalized. Does it matter what my earnings were prior to collecting benefits or does that not have any impact?
Robert:
Social Security’s “first-year rule” exempts income earned prior to starting your Social Security benefits. The monthly limit applies to any month after benefits start.
Thanks for contacting us.
Gerry Hafer, National Social Security Advisor
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
I am planning to stop working in August 2022. I am 65. I will have made far more than the limit prior to my retirement. How will my SS be penalized?
Ann:
Social Security’s “first-year” rule will apply in your case. This means that earnings prior to the start of your benefits are exempted from the Earnings Test. You will, of course, be subject to the monthly earnings test for the remaining months in this calendar year. In 2022, that monthly limit is $1,630, so any earnings in excess of that amount will trigger Social Security to “take back” $1 for every $2 over that amount.
Thanks for contacting us. If we can provide any additional assistance, please contact us t [email protected].
Gerry Hafer
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
Please give an example for a self-employed person. If I have gross earnings of $3,000.00 in one month and deductible expenses of $1,500 in the same month, would I count only $1,500 toward the earnings limit?
Kimberly:
For self-employed workers, the Social Security “Earnings Test” uses net self-employment income, meaning gross earnings minus deductible expenses, to compare to the limit. So, in your example, $1500 would be used for the comparison in the test. Thanks for contacting us.
Gerry Hafer, National Social Security Advisor
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
I will reach FRA in July of 2022 , am semiretired and was planning on some part time work in future. Does the 1630 $ cap apply for Aug thru December, what about 2023?
Carl,
Once you reach your full retirement age in July, your earnings from working will no longer affect your monthly Social Security benefit. So if you plan to work part time (or even full time) thereafter, you do not need to worry about Social Security’s annual (or monthly) earnings limit. The earnings test only applies to those who are collecting Social Security and working before reaching their full retirement age.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I plan to retire at age 62 which will fall in June 2022. Does the first year rule apply to me?
Suzanne
Yes, when someone retires mid-year and completely stops working, your earnings prior to the month you begin your Social Security retirement benefits do not count. It is very important you keep your final paycheck stub in case you have to present it to Social Security as proof of your last date worked. Even though you will not receive your final payments until the next month, it does not matter, as it was earned prior to you starting your benefits. For example, if you start your benefits in July, your first month of eligibility at age 62 (unless your birthday is on the 1st or the 2nd, then your first month of eligibility is June) and your last date worked is June 30th, your prior earnings will not affect your July benefit.
If you have further questions please contact us by emailing [email protected] or calling 888-750-2622
Sharon Kleczka RSSA
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
I took applied for Social Security in February 21, though I wont reach my FRA until August of 2022. There are three months in 2021 when I anticipate earning more than the $1,580 per month that I am allowed to earn before full retirement age. ( I am self-employed). I understand that I will be penalized $1 for every $2 I earn in 2021 over the set limit. My question is, should I contact SSA every time I exceed my monthly limit and accept my reduced benefit ( if any), or can I wait until year’s end when contract labor payment information is sent to the Federal Government by employers? Ultimately is it an annual cap or a monthly cap?
My earnings overage might be absorbed by the remaining months in 2021 when i earn less than the earnings cap.
Tom,
In 2021 you’ll be subject to the “first year rule” which limits your earnings to $1580 per month starting in the month your SS benefit begins and ending in December of this year. If you exceed the monthly earnings limit in any remaining month of this year, you won’t be entitled to any benefit for that month. Then, starting in 2022 you’ll be subject to the annual limit up until August 2022 when you reach your full retirement age. The annual limit for you next year will be considerably larger because 2022 is the year you reach FRA (the annual limit for you next year will be over $50,000); as long as you don’t earn more than that between January and July, the earnings limit won’t apply to you next year. If you do exceed next year’s annual limit before your FRA, they’ll take back $1 for every $3 you are over the limit.
For this years monthly limit, you have a choice to either notify SS in advance if you know you will exceed a future monthly limit, in which case they’ll simply withhold your benefit for that month. If you do not notify them in advance, they will review your 2021 earnings record when they receive your earnings data from the IRS next year, and contact you requesting information about your monthly earnings. When you provide that data to them, they will make a determination if you exceeded the monthly limit in any month and assess a “penalty” if you did. The penalty will be that they will want back the full amount of benefits they paid you for any month you exceeded the $1580 earnings limit. They will also give you a choice to either repay those benefits in a lump sum, or have your future benefits withheld until they recover what you owe.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I will be retiring at the end of April. At the time of retiring i will be under the annual limit for earnings ( $14,000 ). If i decide to work after i retire ( may thru December ), will i be restricted by the monthly limit ( $1,580 ) or will i be restricted by the remaining annual limit. $12,640. ( 8 months X $1,580 ). In other words will i be able to earn unrestricted monthly amounts as long as i don’t go over the $12,640 remaining annual amount.
Mickey,
When you retire mid-year in any year before the year you reach your full retirement age you’ll be subject to a monthly earnings limit for the remaining months of that year. For 2021, the monthly earnings limit is $1580. If you exceed the monthly limit in any remaining month of 2021, you won’t be entitled to any benefits for that month. However, if it would be to your financial advantage to do so, you can request that Social Security use the 2021 annual limit ($18,960) instead of the monthly limit. You should do that if using the annual limit would result in less of a penalty than using the monthly limit. The full annual limit would be used, so if your 2021 earnings would be less than or only slightly more than the annual limit of $18,960, that penalty ($1 for every $2 you are over the limit) may be less than losing your entire benefit(s) for exceeding the monthly limit. You would need to do the math considering the penalty using your full year’s earnings vs. using the monthly limit to decide which option to use. And please note – in the year you reach your full retirement age, both the annual limit and the monthly limit go up considerably, and once you reach your full retirement age there is no longer a limit on how much you can earn when receiving Social Security benefits.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
Thank you very much for the informative reply. Clarifying that my annual earnings limit after i retire on April 30 would be $12,640 ( 8 months ) not $18,960?
Thanks
Mickey,
The annual earnings limit is always based upon the full 12 months of the year; it isn’t prorated based upon the month your benefits start. In other words, the annual limit for 2021 is $18,960, regardless of when you start your SS benefits.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
Thank you for the clarification.
From research I have done ( Social Security POMS) it is my understanding that the monthly income rule does not apply until you have exceeded the $18,960. So you go over the $1,520 limit in any month as long as the cumulative total for the year is not over $18,960. Once you go over, then the monthly limit applies. Can you confirm?
On the other hand, I did not know that you can ask the Social Security to switch from monthly income limit to annual limit if only one exceeds the $18K by a couple of thousand dollars? Where can I find that in the SS website? I exceeded the monthly income in December 2020 only but my total income for the year is over the limit by $2600.
Thanks
The monthly income limit applies only during the first year collecting benefits, when someone’s benefits start mid-year. It does not apply in subsequent years (after December of the first year collecting benefits). The purpose of this rule is to exempt income earned prior to the month your benefit starts from being included in the “earnings test” for that first year. This first year rule says that beginning in the month your benefits start, up to and including December of that year, you cannot exceed the monthly limit and be entitled to SS benefits for that month. So, the monthly limit isn’t used after you exceed the annual limit in any given year; it is used only during the first year collecting benefits if those benefits start being paid mid-year. After your first calendar year collecting, only the annual limit applies.
The annual limit for 2021 is $18,960 and if that is exceeded Social Security will take back benefits equal to $1 for every $2 you are over the limit. Unless you inform them in advance that you will exceed the annual limit, they will discover it the following year when you file your income tax with the IRS (or when W-2s are filed by your employer). If you have exceeded the annual limit, they will send you an overpayment notice telling you how much you owe for exceeding the annual limit, requesting that you pay it back in a lump sum. If you choose not to pay in a lump sum, they will withhold your future benefits until they have recovered what is due. If you exceed that annual limit by even a small amount, your “penalty” will be half of the amount you exceeded the annual limit by. If your benefits are withheld for any months because you exceeded the earnings limit, when you reach your full retirement age you will get time credit for the number of months benefits were withheld, thus increasing your benefit amount at your FRA and allowing you to recover some of that penalty (or all of it if you live long enough). You can find all of this in Chapter 18 of Social Security’s Online Handbook at https://www.ssa.gov/OP_Home/handbook/handbook.html.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I was born in 1957 and my FRA is 66 1/2 but I plan to retire March 2021. If my SS benefit starts March 1 can I still earn the $1,580 earnings limit and still receive the payment that will come in April 2021? Also, what if I get paid on April 1 for the $1,580 earnings in March 2021?
Robbie,
Earnings are counted based upon the month they are earned, not the month they are paid, so if you get paid on April 1st for March, those earnings count toward March. Essentially, your earnings prior to the month your benefits start won’t count, but for each remaining month of 2021 (March through December) you’ll be subject to a monthly earnings limit of $1,580. If you exceed that amount in any month, you won’t be entitled to benefits for that month. Starting in 2022, you’ll be subject to an annual limit, which will be a bit higher than the 2021 annual limit of $18,960 (the earnings limit changes annually). If you exceed the annual limit, SS will take back benefits equal to $1 for every $2 you are over the limit. The earnings limit goes away when you reach your full retirement age. Please address any future questions to [email protected].
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I have read a lot and no where does it state how monthly earnings are determined by the admin. Absolutely no where can I find this answer. Weeks cross over, months cross over. I really would appreciate some clarity on this since I intend to maximize my work and my retirement combined. just the first year rule application, I would assume annual would be subject to the same process, but it is not clear.
Keith Hunter,
Here is the actual POMS from the Social Security Administration (SSA) Website. RS 02501.021B2b states “Regardless of the excess earnings amount, pay full benefits for any month the beneficiary neither earns wages higher than the monthly exempt amount”. RS 02501.030C states “A NSM is any month of entitlement, before FRA, that an entitled beneficiary neither earns wages of more than the monthly exempt amount nor performs substantial services in self-employment”. The non service month will be based on when it was earned. https://secure.ssa.gov/poms.nsf/lnx/0302501021
Social Security goes by how much you earn in a month as opposed to how much you are paid in the month. You may have to submit prove of your monthly earning to Social Security.
As far as the annual limit, they go by the Gross income on your W-2 in box 3.
If you would like further assistance please contact the AMAC Foundation at 888-750-2622 or email [email protected]
Sharon L Kleczka
NSSA Soical Security Advisor
AMAC Foundation
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
Thank you, very helpful. Looks like I will need to contact SSA to be proactive .
Thanks again
I am getting ready to retire and want to make sure I do this right. I was planning on requesting Social Security Benefits effective Jan 1 2021 and still working thru Feb 2021 (2 months earnings). I have since learned that some pretty substantial bonus money will also be paid out which will put me way over the limit of 41,880. Should I reconsider and wait and retire March 1 would the special rule then apply for the balance of the 10 mths remaining I will be working part time but making under 1520 a mth?
If you wait until March to claim your SS benefit, all earnings received prior to March (including the “substantial bonus money”) won’t count toward the earnings limit. Instead, starting in the month of March 2021 and for the remaining months of 2021 you will be subject to a monthly limit of $4210. If you exceed the monthly limit, you won’t be entitled to benefits for that month. Then, starting in 2022, you’ll be subject to the 2022 annual limit, which will be 12 times more than the 2022 monthly limit (the limits change annually). The earnings limit goes away entirely once you reach your full retirement age (or “FRA,” which is somewhere between 66 and 67, depending on the year you were born). The limits are also much more during the year you attain your FRA.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
I’m so confused. If I file for my social security can I work up until my first check or do I have to stop ? I will not be FRA.
Hi Becky,
As you are under your FRA you are subject to an earnings limit. The earnings limit is subject to change each year, and if you go over the limit Social Security will withhold $1 for every $2 you go over. The earnings limit for 2020 is $18,240 or $1,520 per month. The earnings limit for 2021 is $18,960 or $1,580 per month. When you are under your FRA you have to options available to you on how the earnings limit affects you. If you are retiring mid-year and want to start your SS benefits, you have the option to use the monthly limit as all your earnings before the month you begin your benefits don’t affect you. So, for example you want to start your benefits this month in November, but you have already made over the annual limit of $18,240, but your gross earnings or net self-employment will be less that $1,520 in November and December, you will be eligible for those two payments. So in response to your question: Social Security pays one month behind, meaning your benefit for November will actually be received in December, meaning your earnings in November will effect that payment, even though you won’t receive it to the following month. If you are over the annual limit already and also earning more than the monthly limit, you should wait until January 2021 to start your benefits if you are planning on retiring early.
If you start your benefits in January 2021, you will be under the annual limit, but you will still have the option to use the monthly limit if you retire mid-year and have gone over the annual limit. If you are still going to be under the annual limit when you retire, and you do not plan on continuing to work once you start your benefits, you may then work until you receive your first payment as you are not required to use the monthly limit in your first year of retirement.
If you are in the year you will reach your FRA the annual limit goes up to $48,600 for 2020, or $4,050 per month up to the month you reach your FRA. That limit is $50,520 annually or $4,210 per month in 2021. If you go over the limit Social Security will withhold $1 for every $3 you go over the limit.
I know the rules for the earnings limit can be very confusing, please contact me if you have further questions.
Sharon L Kleczka
AMAC Foundation
(888)750-2622
So this is my take from this.i semi-retired in March 2019.I never exceeded the monthly cap of $1470.00 in any month.However,i was full-time Jan. and Feb.This will put me over the annual threshold of 17640.00.By about $2000.00.My SSI monthly payment is $1860.00.They will take $1000.00 from my check in 2020?Am I close ?is this fairly accurate?
Jason,
Assuming you started your early (before your full retirement age) SS benefits in March when you semi-retired, your earnings in January and February won’t count toward the earnings limit (because you weren’t yet collecting SS when you earned that). Only your earnings after the month your benefits started count. For each remaining month of 2019 you’ll be subject to the monthly limit ($1470)and as long as you don’t exceed the monthly limit they won’t take back any benefits. If you exceed the monthly limit even by $1, you won’t be entitled to benefits for that month. You will get a letter from Social Security in early 2020 asking you to break out your 2019 earnings month by month. They will use your response to determine if you exceeded the monthly limit. If you didn’t, no benefits will be taken back. If you did, they will withhold full month(s) of benefits until they recover what you owe – they don’t withhold partial months; they withhold full months benefits, and eventually refund you any overage.
If you started benefits before March 2019 and your January/February earnings result in you owing them $1000, they won’t withhold $1000 from a future benefit check – they will withhold a full month’s benefit to recover what you owe. If you owe less than a full month’s benefit, they’ll still withhold a full month, and eventually refund you the over-withholding. “Eventually” means the beginning of the following year.
Russell Gloor
The AMAC Foundation
National Social Security Advisor
Okay, so I retired early this year, I am 63 and my question is that if I earn this year $1000 over the max limit of $1470 in any given month this year what happens? Does it come under the $1 for every two dollars rule or do they keep my next SS Check as a penalty? I know that this doesn’t apply to next year, my question is just about the year you retire in.
Thanks, Lee
If, prior to your full retirement age, you retire mid-year you will be subject to a monthly earnings limit starting in the month your benefits started and lasting for the remainder of the calendar year. If your earnings exceed that monthly limit ($1470 for 2019) in any month after your benefits start, Social Security will take back the entire benefit for that month. Starting next year, you’ll be subject to the annual limit ($18,240 for 2020) which, if exceeded, will result in SS taking back $1 for every $2 you are over the limit.
Under the special exemption rule – first year, If you work for first 6 months of year and receive a pension from a prior company for the full year, elect to collect to take ss benefits beginning in month 7 (before age 66), does the pension payments count as earned income in the 2nd half the year, and each month’s benefit paid is under the monthly threshold amount rate (approx. $1400). Does the ss paid out for the 2nd half of the year the full amount due without any penalty withholding? .
It is not uncommon for someone to retire mid-year and to start taking their benefits the month after they retire. If you have already gone over the annual limit when you retire, you are able to use the monthly limit of $3,780 (if it is the year you are turning your FRA of 66) for the months after you start taking your benefits. If it is not the year you turn your FRA, the monthly amount is $1,470. These amounts are for 2019, and subject to change each year. The pension payments you take after retirement do not count as earned income. All income received in your last month of employment, does not affect you starting your benefits the month after. Example: You retire in June, and don’t receive your final pay until July. As long as the income was all earned in June, you will be able to receive 100% of your July benefit. I do recommend keeping your final paycheck stub safe, so you will be able to prove it to Social Security. Special payments after retirement that do not affect your benefits are bonuses, vacation pay, commissions, and un-used sick pay, severance pay, back pay and standby pay.
I feel like your special earnings test rule is not clear. You do not mention that people are penalized for retiring mid-year and have to account for the income they received up until that date. It should state that your income combined with the benefit your receive after retirement until the end of the year cannot exceed a certain amt. It would be best to wait until the new year so you don’t have any income showing. We were told that the money you make the first part of your retirement year would not count against you. All we want is an answer but you can never get through to the SS
on the phone. When my husband went in to your office the person just said you just have to pay it back with no explanation. Thanks for time.
Thank you for the comments you submitted via the AMAC Foundation’s Social Security Report website. The issue you commented about—the loss of benefits due to “excess earnings”—is a bit confusing to many, and has variable rules depending on the year in which one attains “Full Retirement Age (FRA).” In evaluating your comment, we have made the assumption that your situation is that you reached FRA in the current year, and your question relates to your earnings in that same year. We further assume that your earnings prior to reaching FRA exceed the limit set for allowable earnings in the year of FRA. So, given those assumptions, our reply to your comment is: The “Special Earnings Limit Rule” applies only to actual earnings before the month in which FRA is attained. It is only these earnings that count toward the $41,880 (in 2016) limit. Once FRA is attained, the earnings test evaporates. Specifically, the rule states that: “If more than $41,880 is earned in 2016 before the month the beneficiary reaches FRA, one dollar of benefits will ordinarily be withheld for each three dollars of earning over $41,880.” The benefits received from Social Security after attaining FRA do not factor in to the calculation of benefits to be withheld.
If this response does not answer your question, or if the assumptions we’ve used are not correct for your situation, please contact us for further discussion. We appreciate the opportunity to assist you. See the “Social Security Advisory Services” page of this website for contact information.
Gerry Hafer, Certified Social Security Advisor, AMAC Foundation, Inc.
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