Quote:
Originally Posted by Gone Sailing
I'm starting my retirement in April 2017 at age 63. I have been working in Yacht Sales full time but plan to now work part time. I have a rather large commission check of about $18,000 that was supposed to pay out in March before I retired but it has been delayed until April. I know I will lose my check for April but can I lose any more because I'm over the yearly limit in a normal full year. Under the first year rule it states that for any hole month I earn less than $1,410 a month I'm considered retired and will receive a SS check regardless of my yearly income. Is this true or can they penalize me for the entire year.
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The 2017 limit for people NOT REACHING full retirement age in 2017 (you- since you are 63 and want to collect) is $16920.00. So, you already know that between your commission check of $18000.00 and your full time work in Jan- March, you are over the yearly limit.
You also plan to work part time April to Dec, and it seems like your plan is to stay under the $1410.00 (monthly limit) for those months.
So let's first calculate your Total income from work. although I don't know how much you made Jan- March, I will estimate you earned gross $4000.00 each of those months.
So you have Jan-March, $4000.00 x 3 = $12000.00.
April, a commission check of $18000.00 plus you said you still want to work, so I will add $1300.00 from the part time work you did in April, so that brings April to $19310.00.
May- Dec I will keep $1300.00 as an estimate (but just know that as long as you are $1410.00 or less in those months, you are DUE those months.
May-Dec is 8 or $1300.00x8=$10400.00.
Total income is $12000.00 + $19310.00 + 10400.00 = $31310.00.
So, the rule is ANY MONTH you earn under $1410.00 you are due a check, regardless of how high the annual amount is. So you are due May to Dec. That is called the monthly test and applies
only in ONE YEAR, which for most people is the year they retire.
However, since the commission is a surprise and you also want to work in April, the commission check brings you over the monthly limit for April and your MONTH of ENTITLEMENT to SSA should NOT be April, but it should be May.
You see, not only are you not due the April check, you are carrying the one month extra reduction factor for the month of April. And, SSA does not refigure your reduction factor until you are OVER your full retirement age, which is not until the year you turn 66.
So, why carry the extra .56 reduction factor for all the checks in the intervening years?
Here is what you do, if you haven't done so already. You need to go to SS (make an appointment) - call 1-800-772-1213 to do that, and tell them you already applied for your retirement to be effective April, but need to change the month to May.
You are not too late, because even the April check does not arrive until May (and the May check in June). This way you can have the proper amount of reduction months and not be penalized for an unforeseen change of plans.
Now, there is one wrinkle that might, or might not work to your benefit. You said you worked in yacht sales, and it seems like your work will continue with the same employer and same line of work. If that is so, then do as I suggested and change your month of entitlement from April to May.
But, if you are retiring from yacht sales in March, and going to work at a totally different employer in April ( say Walmart) and your April earnings from Walmart are under the $1410.00, well then the commission received in April can be "credited" to the last month of work at the previous employer, and not go against you for April.
Here is a link to the SSA pamphlet about work and earnings in 2017. Please especially pay attention to pages 4 and 5 (and my answers to you assumed you are an employee, not self employed). You will see that WAGES count WHEN EARNED, NOT WHEN PAID, but self employment is different.
https://www.ssa.gov/pubs/EN-05-10069.pdf
Hope this helps.