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Date Add : 09-12-2011 

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Social Security Question:

Working while collecting Social Security

Social Security Answer:

Hi there.

I am considering taking early benefits when I turn age 62 in August. However, I am continuing to work in my own business. I understand that any earnings exceeding $14,160 per year will result in reduction of my monthly benefit by $1 for each $2 I earn -- or in my case, for each $2 in net earnings from my business (organized as an LLC) I am currently projecting that my business will produce net income of approx. $24,000 annually, so by my calculation this would mean that assuming my benefit payment in 'retirement' (no employment) at age 62 would be $1,600, under the scenario described above, my monthly payment would be reduced by $391 as a 'penalty' for working. Does this sound correct?

My other question is: How often are the monthly benefit payments recalculated? If I commence receiving payments in 2011, for example, will my 2012 payments be adjusted to reflect the impact of any 'excess' employment earnings for 2011? If my earnings from employment cease during 2012, do the payments resume at their earlier level? If so, when?

I also notice on the SSA web site that there is a reference to a rule of thumb used to determine whether someone is 'retired.' (less than 15 hours per month=retired; 45 or more= not retired, as I recall.) What is the impact of this? Does SSA determine whether I am retired only in order to establish the amount of my first payment? I find their discussion a little confusing and somewhat incomplete.


Charlie O'Neill

Support Replied ~ 05-15-2011 15:55:37

Dear Charlie:

Self-employment is a difficult thing to access at retirement. SS uses the last 3 years to estimate what you will earn in the year you retire. If you allege that you will be earning less, then you have to show them how you are reducing your hours, your production, and other things affected by your lower estimate. Since you are the boss, you can hold your earnings and pay yourself at a later date. Because you have control over your income, Social Security will ask you a tirade of questions. In a normal situation, when a person retires, they punch a clock and the amount to pay for each month is easily determined....With self-employed people, it goes by the year.....The net gain divided by 12.

Since you are saying you are continuing work, SS might have you file and then wait until the year is over to see what your net gain was and then pay you. The form you need to look at is a "self employment/corporate officer questionnaire" Those are the questions that you need to answer. You might be termed a questionable retirement where, like I said, SS will hold your payments and pay you at the end of each year after they know what you earned.

The only easy self employment claim is when the business is sold or if you have nothing to do with the daily routine or decisions made in the business. It is hard for me to further advise you because I don't know what your earnings have been in the last 3 years... Normally, if you were to file with an estimate of $24000 and a $1600 SS benefit amount, you would lose between 3-4 checks a year because of your earnings....If you have earned higher amounts in past years and are still working at the same rate, SS will not believe your new estimate.

Benefits are recalculated every year about June or July to include the prior years earnings and then you get a special check which includes in extra that should have been paid from January till June. The continuing checks will be the new rate. Go to SSA.GOV and get the form that I named above....The date of change is your retirement date....You have to prove to SS that you are "retired" unless your earnings have always been low......This is a very complicated issue...Write back if you need more advice.....Carol

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DISCLAIMER - You should consult with your local Social Security Office before acting upon any information received as a response to your question on "Social Security Advisor".

"Social Security Advisor" is intended to provide accurate and authoritative information with regard to the subject matter covered. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting, investment or other professional advice or services.

Information obtained from, including e-mail responses from "Social Security Advisor" should be considered as general educational information. You must never rely upon the advice given here. Your individual situation may not fit the generalizations discussed. Only your local Social Security office can evaluate your individual situation and give you advice.

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