How Do Special Payments I Receive After Retirement Affect My Social Security?

An African American senior man playing with his dog.
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Special payments after you retire can be confusing and might leave you wondering if the Social Security Administration will reduce your benefit because of them. In most cases, special payments are payments you receive for work you did before you retired. The SSA states that usually, these payments will not affect your Social Security benefit

See: Social Security — How You Can Work and Still Receive Benefits
Find: A Month-by-Month Guide To Retiring by the End of 2022

What Qualifies?

If you worked for regular wages, income you receive after you retire counts as a special payment as long as the last work you did to earn the payment was completed before you stopped working. The SSA states that special payments can include:

  • Bonuses
  • Accumulated vacation pay or sick pay
  • Severance
  • Back pay
  • Standby pay
  • Commissions from sales
  • Retirement payments

Important to note: If you were self-employed, special payments include any net income you receive after the first year you stop working. You must have done the work before you qualified for Social Security benefits.

See: How Much It Cost To Retire in the Year You Were Born
Find: How Joe Biden’s Presidency Has Affected Retirement After One Year in Office

Although special payments should not affect your monthly Social Security benefit at full retirement age, the rules change if you have not yet reached full retirement. Should you claim your Social Security benefits early, there will be limits to how much you can earn before your earnings affect your monthly benefit check.

Retire Comfortably

If you will be younger than your FRA for the whole year, the SSA reduces your payments by $1 for each $2 you earn above the earnings limit. For 2022, the earnings limit is $19,560.

If you reach FRA this year, the SSA reduces your payments by $1 for every $3 you earn above the earnings limit. For 2022, this limit is $51,960. However, in the month you reach your FRA, you can receive your full benefits regardless of how much you earn.

The SSA website has a Retirement Age Calculator you can use to find your FRA. The FRA varies by the year you were born, so it’s important to consider it when planning for retirement, as yours may be different from your peers’. 

The main thing to remember with special payments is that if you now receive income for work you did before you retired and that income simply took a while to get back to you, it will most likely not affect your monthly benefits. An example of this is ongoing commissions from sales. If you were a salesperson and you receive ongoing commissions as a result of sales you made pre-retirement, this counts as a special payment and will not affect your Social Security. 

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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