I'm 63 plan on retiring in Jun. I want to collect Social security starting in April so I will have 2 social security payments before actually retiring. I read that once you retire your income up to the month you retire will not count against your limit of $17,000.00. So if I earn $6,000.00 from my primary job for the 2 months I keep working APR, MAY and retire on Jun 2nd and the prorated amount of the $17k I can earn from Jun-Dec is about $1416.67 * 7=$9,916.67. So the additional $6,000.00 collected will not exceed the $9,9916.67 for 2018 I will not have any social security earnings taken away in 2019. Is this correct or do I not understand the current social security system's rules?

Thanks,

Jeff

Hi Jeff,

It sounds like you've misinterpreted the Social Security earnings test rules. The annual earnings test counts your entire calendar year earnings regardless of what month you retire or file for benefits ((https://www.ssa.gov/planners/retire/whileworking2.html). But, in the first year you apply for benefits an alternative monthly earnings test may be used instead of the annual test(https://www.ssa.gov/planners/retire/rule.html). These 2 earnings tests are separate and distinct, and whichever test is more advantageous to the beneficiary is used.

The 2018 annual test exempt amount is $17,040. The monthly earnings test limit is $1,420. Therefore, if you file for benefits this year you could at least be paid for any month(s) in which you earn no more than $1,420, regardless of how much you earn for the year or in any other months. Under your plan as you describe it in your question, though, the monthly test would permit you to be paid only for June through December.

If you followed your plan as described, Social Security would also determine whether or not you could be paid more benefits using the calendar year test instead of the monthly test. Assuming you earn $3,000 monthly from January through May and $1416.67 for June through December, your 2018 calendar year earnings would be $24916.69. Therefore, Social Security would need to withhold roughly $3,938 (i.e. ($24,916.69 - $17,040)/2) before paying you under the annual earnings test. So, unless your monthly benefit rate starting in April was more than $1,969, you would not be paid for April or May using your plan. In that event Social Security would use the monthly test in order to pay you for June through December.

However, lets say that you expected to earn $24,916.69 in 2018 and wanted to be paid as soon as possible. You could file for benefits as early as this month (i.e. February), and if your monthly benefit rate was $1,313 for example, it would only require withholding of 3 months of your benefits to cover the $3,938 required to be withheld under the calendar year test. So in this example, Social Security would withhold benefits for February through April and would pay benefits for May through December.

Before filing, you should strongly consider using our maximization software to calculate your benefit rate and determine your best strategy for claiming benefits. The software is fully programmed to handle earnings test considerations, so it should be of great help to you in making your plans and comparing your options.

Best, Jerry