Depending on what type of Social Security benefits a person receives, other sources of income, work-related, or non work-related, can impact your Social Security benefits. Understanding all the rules Social Security has in place can be confusing, so Social Security has put together an outline of how certain types of income can affect your benefits.
What Income Counts And How Social Security Counts It
If you work for someone else, only your wages count toward Social Security’s earnings limits. If you’re self-employed, we count only your net earnings from self-employment. For the earnings limits, we don’t count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains. We do count an employee’s contribution to a pension or retirement plan, however, if the contribution amount is included in the employee’s gross wages. If you work for wages, income counts when it’s earned, not when it’s paid. If you have income that you earned in one year, but the payment was made in the following year, it shouldn’t be counted as earnings for the year you receive it. Some examples are accumulated sick or vacation pay and bonuses. If you’re self-employed, income counts when you receive it — not when you earn it — unless it’s paid in a year after you become entitled to Social Security and earned before you became entitled.
Special Rule For The First Year You Retire
Sometimes people who retire in mid-year already have earned more than the annual earnings limit. That’s why there is a special rule that applies to earnings for one year, 5 (over) usually the first year of retirement. Under this rule, you can get a full Social Security check for any whole month you’re retired, regardless of your yearly earnings. In 2019, a person younger than full retirement age for the entire year is considered retired if monthly earnings are $1,470 or less. For example, John Smith retires at age 62 on October 30, 2019. He will earn $45,000 through October. He takes a part-time job beginning in November earning $500 per month. Although his earnings for the year substantially exceed the 2019 annual limit ($17,640), he will receive a Social Security payment for November and December. This is because his earnings in those months are $1,470 or less, the monthly limit for people younger than full retirement age. If Mr. Smith earns more than $1,470 in either November or December, he won’t receive a benefit for that month. Beginning in 2020, only the annual limit will apply to him. Also, if you’re self-employed, we consider how much work you do in your business to determine whether you’re retired. One way is by looking at the amount of time that you spend working. In general, if you work more than 45 hours a month in self-employment, you’re not retired; if you work less than 15 hours a month, you’re retired. If you work between 15 and 45 hours a month, you won’t be considered retired if it’s in a job that requires a lot of skill, or you’re managing a sizable business.
Should You Report Changes In Your Earnings?
We adjust the amount of your Social Security benefits in 2019 based on what you told us you would earn in 2019. If you think your earnings for 2019 will be different from what you originally told us, let us know right away. If other family members get benefits based on your work, your earnings from work you do after you start getting retirement benefits could reduce their benefits, too. If your spouse and children get benefits as family members, however, earnings from their own work affect only their own benefits. If you need help in figuring your earnings, contact us. When you call, have your Social Security number handy.
Are Higher Monthly Benefits Possible Because Of Work?
Yes. If some of your retirement benefits are withheld because of your earnings, your monthly benefit will increase starting at your full retirement age to take into account those months in which benefits were withheld. As an example, let’s say you claim retirement benefits upon turning 62 in 2019, and your payment is $942 per month. Then, you return to work and have 12 months of benefits withheld. We would recalculate your benefit at your full retirement age of 66 and 6 months and pay you $1,007 per month (in today’s dollars). Or, maybe you earn so much between the ages of 62 and 66 and 6 months that all benefits in those years are withheld. In that case, we would pay you $1,300 a month starting at age 66 and 6 months.
The Ways Work Increases Your Benefits
Each year we review the records for all Social Security recipients who work. If your latest year of earnings turns out to be one of your highest years, we refigure your benefit and pay you any increase due. This is an automatic process, and benefits are paid in December of the following year. For example, in December 2019, you should get an increase for your 2018 earnings if those earnings raised your benefit. The increase would be retroactive to January 2019.
