Social Security Earnings Tests (US)

Reply Mon 29 Jan, 2007 11:46 pm
Can the monthly earnings test override the annual earnings test and cause reduction of benefits for a person that passes the annual test but not the monthly test?

For example: For a person that reaches full retirement age in April 2007 and begins receiving benefits in January 2007, the annual earnings test allows up to $34,440 to be earned during the three months preceding April. The monthly test for that individual limits earnings to $2870 per month.

In SSA literature, wherever the monthly test is mentioned, the explanation is that it allows a person that has already exceeded the annual test amount to receive benefits for any months that they earn less than the monthly amount. By that context it would appear that the answer to my question above should be "no, the monthly test only applies to those that have exceeded the annual earnings test".

applicable links

You can work and get Social Security at the same time.

Special rules for the first year you retire.
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Reply Tue 30 Jan, 2007 12:16 am
Maybe I misunderstood either your question or your second link. It sort of seems to have your answer. In any case, your links were more useful to me than I am going to be to you.

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Reply Tue 30 Jan, 2007 01:26 pm
I am glad that you found the links useful Roger, and you are right, the second link does sort of answer my question.

This Q&A even looks a bit clearer IMO.

Answer ID : 335

Category: Earnings and Employment Annual Earnings Test

If I retire in the middle of a year is the amount I earn counted from Jan 1, or from the date I retire?

When entitlement to benefits begins or ends during the year, many people work in months before or after entitlement. We use a monthly test to consider these earnings. The monthly earnings test provides that a person can receive full benefits for any month in which he or she does not earn wages over one-twelfth of the annual exempt amount and does not perform substantial services in self-employment.

The monthly amount for 2007 is $1,080. We pay benefits in these months regardless of the amount by which the person's earnings exceed the annual exempt amount. We use the monthly earnings test in the first year that a person does not work over the monthly limit in at least 1 month. We also use the monthly test for the year benefits end for children (including students) or parents who get benefits because they are caring for a young or disabled child.

It seems clear to me that the intent of the monthly test is to enable benefits, not restrict them. The rub comes when dealing with the bureaucracy that makes the decisions. Of the four individuals at the SSA that I have presented this question to, only one has agreed with me.

I have also submitted this question to the SSA in e-mail form. Does anyone care to venture a guess as to what the answer will be?
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Reply Tue 30 Jan, 2007 01:51 pm
At work, I deal with SSA in a different context. They have one answer; send them to the local office to get the SSN straightened out. Your question will probably have an equally standard, and useless answer.
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Reply Sat 3 Feb, 2007 01:05 pm
To their credit, the local office was where I received the most reasonable and correct answer IMO.
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Reply Sat 3 Mar, 2007 01:03 pm
I am confused on the earnings test because I do not see this example in Social Security's web site..

I start receving benefits in April 07. I have been working all year but I have reduced my working hours. I have not reached the yearly limit yet and I don't know if I will work all year. But what if I reach the yearly earnings limit in Sept. 07 and for all 12 months I have earned over the monthly limit. Let's say I earn $4,000.00 over the limit for the entire year.

How does the monthly test apply then and how much will I be penalized?
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Reply Sat 27 Oct, 2007 12:39 am
Little bit late here, but I found this in the Oct AARP newsletter

Reasons to starte later: You want to avoid the earnings penalty. People who take their benefits between 62 and full retirement age and continue to work musg give back $1.00 in benefits for every $200 they earn above the Social Secuirty earnings limit. In 2007, the limit is $12,960.00. However, in the year in which you reach full retirement age, Social Security will withhold $1.00 for every $3.00 you earn over the limit of $34,440. But that limit is in effect only until the month you reach full retirement age. After that, the limit goes away.

I would prefer to get such a clear statement from a more official source, but this is what I found, and where I found it.
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Reply Sun 28 Oct, 2007 01:13 am
Thanks roger. The AARP wording is clear, but the Social Security website states essentially the same thing.

If you will reach1 full retirement age in 2007, the limit on your earnings for the months before full retirement age is $34,440.
(If you were born in 1942, your full retirement age is 65 years and 10 months.)

Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

You can work and get Social Security at the same time.

For me it is a done deal, and I did end up getting payments for the months in question, Jan, Feb, and Mar.

Here is what happened. I had previously had an interview with the local SSA office to enroll in Medicare and at that time I had a very knowledgeable representative recommend that I start my retirement payments in January. Since during that Interview I had all of my questions answered and all of the necessary documents were shown to them, I decided to just use the online enrollment.

Bad decision. There was a question... How much do you expect to earn in 2007? So I answered with a full years pay, a number that exceeded the annual earnings limit of $34440. I fully expected them to realize that since I reached full retirement age in April that only 1/4 of that pay would be earned before April. Nope. They sent me a letter stating that since I would be exceeding the annual limit, I would not receive any payments until April.

That began a long and frustrating exercise of getting wrong answers and non answers. A couple of them told me that even if I didn't exceed the annual limit, the monthly limit would apply and I exceeded that.

The situation was finally resolved buy the person in the local office that gave me my Medicare enrollment interview. That person was very sharp and helpful.
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