{"id":18872,"date":"2025-07-31T23:06:07","date_gmt":"2025-07-31T23:06:07","guid":{"rendered":"https:\/\/finderica.com\/?p=18872"},"modified":"2025-07-31T23:06:07","modified_gmt":"2025-07-31T23:06:07","slug":"some-beneficiaries-may-lose-portion-of-benefits","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=18872","title":{"rendered":"Some Beneficiaries May Lose Portion of Benefits"},"content":{"rendered":"
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Social Security benefits are meant to replace part of the earnings an individual loses because of retirement, disability or death. This means that the amount of Social Security benefits received each year depends in part on whether the individual is fully or partially retired.<\/p>\n

In order to determine whether an individual is fully or partially retired, the Social Security Administration (SSA) uses an \u201cearnings\u201d test (also referred to as the \u201cretirement\u201d test) in order to:<\/p>\n

(1) Measure the extent of an individual\u2019s retirement;
(2) Determine the amount, if any, to be deducted from the individual\u2019s monthly Social Security benefit; and
(3) Measure the work activity of family members entitled to benefits on the record of benefits payable to them. The \u201cearnings\u201d test applies strictly to earned income.<\/p>\n

SEE ALSO:\u00a0 10 Ways for Federal Employees to Maximize Social Security Benefits<\/span><\/strong><\/em><\/span><\/p>\n

Earned income includes salary\/wages and\/or net self-employment income. The \u201cearnings\u201d test does not apply to investment income (interest, dividends, and capital gains), rental income, retirement income (for example, CSRS and FERS annuities, TSP and IRA withdrawals and Social Security retirement benefits) and other income (for example, gambling income and lottery winnings).<\/p>\n

The earnings test does not apply if a Social Security beneficiary: (1) Has reached full retirement age (FRA). FRA depends on the year an individual was born and is summarized in the following table:<\/p>\n

Full Retirement Age (FRA) by Year of Birth<\/h2>\n

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(2) Is entitled to benefits because of a disability; (3) Lives outside the US and his or her employment is not covered by Social Security. In that case, the \u201cforeign work test\u201d applies; and (4) Is a divorced spouse of a wage earner whose month of eligibility is prior to the month of divorce.<\/p>\n

A limit on earned income from current work also applies to beneficiaries who are younger than FRA. If a beneficiary earns more than the annual exempt amount, then the beneficiary\u2019s Social Security benefits and family member benefits (including spousal and children\u2019s benefits) that are based on the beneficiary\u2019s work record will also be reduced. However, if only a family member himself or herself earns more than the exempt amount, only that family member\u2019s benefit is reduced.<\/p>\n

What are \u201cexcess\u201d earnings?<\/h2>\n

Each year, the SSA sets limits (the \u201cexempt\u201d amounts) as to much an individual between age 62 and the month he or she becomes FRA can have in earned income without losing any of the Social Security monthly benefit they are currently receiving. If an individual is between age 62 and the year and he or she becomes FRA, the individual during 2025 can have earned income up to $23,400 without losing any of his or her monthly Social Security benefit. For every $2 such an individual has in earned income during 2025 above $23,400, the SSA will withhold $1 of monthly benefits. If an individual reaches his or her FRA sometime during 2025, then between January 1,2025 and the month an individual becomes FRA, the individual can earn up to $62,160 without losing any of his or her monthly Social Security benefit. For every $3 such an individual earns above $62,160 during 2025, the SSA will withhold $1 of benefits. These \u201cexempt\u201d earned income amounts increase from year to year, and are presented for 2025 and 2024 in the following table:<\/p>\n

Maximum Earned Income and Still Receive Full Social Security Benefits<\/h2>\n

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The following example illustrates:<\/strong><\/p>\n

Anthony worked throughout 2024 and continues to work during 2025. In early 2024, he started receiving his Social Security retirement benefit and will reach his FRA on August 18, 2025. The lower exempt amount ($22,320) applied to Anthony\u2019s earned income during 2024. The higher exempt amount ($62,160) applies to Anthony\u2019s earned income from January 1 through July 31,2025 for calendar year 2025. Starting August 1,2025, Anthony\u2019s monthly Social Security retirement benefit is not subject to any \u201cearnings\u201d test.<\/p>\n

Note that the SSA gets information about a Social Security beneficiary\u2019s earned income (salary\/wages) from his or her Form W2 (Box 3 \u2013 \u201cSocial Security wages\u201d) and\/or the beneficiary\u2019s net self-employment earnings reported on the individual\u2019s federal income tax return (Schedule SE).<\/p>\n

What is the impact of \u201cexcess\u201d earnings?<\/h2>\n

Excess earnings are charged against the individual\u2019s Social Security benefits. The benefits are deducted starting with the first chargeable month of the tax year and continue for that year until all excess earnings have been charged. If the individual\u2019s retirement benefits are reduced, then the excess earnings reduce the total family benefit. The reduction to family benefits includes the monthly benefit (other than the disability benefit) payable to the individual\u2019s spouse, child or parent, based on the earnings record of the individual. The following examples illustrate:<\/p>\n

Example 1. Under FRA throughout 2025.<\/strong><\/p>\n

Alma applied for her Social Security retirement benefit in January 2025. March 2025 was the first full month that Alma is age 62. Alma, a federal employee, works throughout 2025 and her gross salary is $32,400. Alma\u2019s monthly Social Security retirement benefit is $900. \u201cEarnings\u201d test result:<\/p>\n

($32,400 \u2013 $23,400)\/2 = $4,500<\/p>\n

In this example, $4,500 of Alma\u2019s benefits are withheld for Alma\u2019s first five months of retirement benefits during 2025 (5 months x $900\/month = $4,500), meaning that Alma will not receive a Social Security check for the months of March through July, inclusive. Her monthly benefit of $900 is payable for the months of August through December of 2025.<\/p>\n

Example 2. Under FRA throughout 2025 and family benefits are also affected by excess earnings.<\/strong><\/p>\n

Jason is entitled to a Social Security retirement monthly benefit of $2,000. Both Jason\u2019s spouse and son are each entitled to an auxiliary benefit of $1,000 per month. During 2025, Jason (age 64) worked throughout the year and had \u201cexcess\u201d earnings of $16,000. These earnings are charged against the total monthly family benefit of $4,000 [$2,000 + (2 x $1,000)]. Therefore, no benefits are payable to Jason, his wife and his son for the period January through April (4 months x $4,000\/month = $16,000).<\/p>\n

Example 3. A family member has excess earnings.<\/strong><\/p>\n

Same facts as Example 2 except Jason is not working during 2025. Rather, Jason\u2019s wife is working. She is receiving a Social Security spousal benefit of $1,000 per month based on Jason\u2019s Social Security record but has excess earnings of $5,000. She therefore will not receive any Social Security benefit for the period January through May (5 months x $1,000\/month = $5,000).<\/p>\n

Example 4. Attaining FRA in 2025.<\/strong><\/p>\n

Geraldine applied for her Social Security in January 2025 and will attain FRA in July 2025. She is working throughout 2025, earning $142,320. Her earnings for the period January through June 30 are $142,320\/2 = $71,160.<\/p>\n

($71,160 \u2013 $62,160)\/3 = $3,000<\/p>\n

In this example, $3,000 of Geraldine\u2019s benefits are withheld for the period January through July 2025. If her monthly benefit is over $3,000, then a partial benefit is payable from January through June 2025 and the full benefit would be paid starting in July 2025.<\/p>\n

Special monthly earnings test during first year of retirement if under FRA<\/h2>\n

Many individuals who retire in mid-year or later have already earned more than the annual earnings limit. During the first year of retirement, a monthly \u201cearnings test\u201d (rather than an annual \u201cearnings test\u201d is used. When the monthly earnings test applies, regardless of the amount of annual earnings, an individual receives full benefits for any month that: (1) His or her earned income (salary\/wages) do not exceed the monthly exempt amount; and (2) He or she does not perform substantial services in self-employment.<\/p>\n

The result is that earnings prior to the month of retirement are not counted toward the annual earnings limit. If there is a month in which an individual is entitled to Social Security benefits and does not earn more than 1\/12 of the annual earnings limit, a monthly \u201cearnings\u201d test is used if that test gives better results than the annual \u201cearnings\u201d test (illustrated in the four examples above). This means that beginning with the month an individual entitled to a Social Security benefit, the individual can have monthly earned income that does not exceed 1\/12 of the annual earnings limit. If the monthly earned income exceeds 1\/12 of the annual limit, then benefits are not payable that month unless they are payable under the regular annual \u201cearnings\u201d test. The following example illustrates:<\/p>\n

Bruce retired from federal service at age 62 on May 31, 2025. He earned $75,000 from January 1 through May 31,2025 and took on a part-time job starting in June, paying him $1,800 per month. Even though Bruce\u2019s earnings for the year ($75,000 plus (7 months x $1,800\/month equals $12,600) $12,600 equals $87,600 exceeds the limit of $23,400, Bruce will receive his full Social Security benefit for June through December 2025. This is because his $1,800\/month earnings in the months after Bruce retired are less than 1\/12 of $23,400, or $1,950\/month for individuals under FRA throughout 2025. If Bruce earns more than $1,950 per month in June through December, he will not receive a benefit for that month unless it is payable under the regular annual test. Starting in January 2026 and afterwards until the year and month he reaches his FRA, only the annual earnings limit will apply to Bruce.<\/p>\n

Special payments after retirement<\/h2>\n

After an individual retires, the individual may receive special payments for work he or she performed before the individual started receiving Social Security benefits. Usually, these special payments will not affect the individual\u2019s Social Security benefits if they are compensation for work performed before the day the individual officially retired.<\/p>\n

For federal employees, the following special payments are not counted towards the earnings limit: (1) CSRS and FERS annuity payments; (2) Military retirement pay and private retirement income such as 401(k) retirement plan distributions; (3) Lump-sum payment for unused annual leave; (4) TSP withdrawals; (5) Final one or two paychecks for the last pay periods worked; (6) Voluntary Separation Incentive Pay; and (7) Health care and dependent care FSA reimbursements.<\/p>\n

<\/span><\/div>\n

Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Social Security benefits are meant to replace part of the earnings an individual loses because of retirement, disability or death. This means that the amount of Social Security benefits received each year depends in part on whether the individual is fully or partially retired. In order to determine whether an individual is fully or partially<\/p>\n","protected":false},"author":2,"featured_media":6705,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[348],"tags":[2466,98,3245,7574],"class_list":{"0":"post-18872","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-retirement","8":"tag-beneficiaries","9":"tag-benefits","10":"tag-lose","11":"tag-portion"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/18872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18872"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/18872\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/6705"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}