Social Security earnings limit confusion - do IRA dividends count as income?

You're on the right track! For Social Security earnings test purposes, only EARNED income counts - that means wages from a job or self-employment income. Investment income including dividends from IRAs (both Traditional and Roth) do NOT count toward the earnings limit. Traditional IRA withdrawals also don't count against the earnings limit, though they may be taxable income for other purposes. Your $17,000 from consulting would count toward the earnings limit since that's earned income. For 2025, if you're under FRA the whole year, you can earn about $22,320 before they start reducing benefits (they adjust it annually for inflation). But make sure you're clear on one thing - survivor benefits are different from spousal benefits from an ex. Survivor benefits are if your ex has passed away. If your ex is still living, you'd be filing for divorced spousal benefits.

the IRA stuff doesnt count for the earnings test just your actual work income. but watch out bc traditional IRA withdrawls DO count for the taxation of your SS benefits, thats a totally different thing from the earnings test!! roth withdrawls dont count for either one if its qualified

I went through this EXACT situation last year! Here's what I learned the hard way: For the earnings test (which determines if they REDUCE your benefits): - Only work income counts - Dividends DON'T count - IRA withdrawals DON'T count - Pension payments DON'T count BUT for TAXATION of benefits (which is different): - Traditional IRA withdrawals DO count - Investment income DOES count - Roth withdrawals DON'T count (if qualified) I ended up having almost 85% of my SS benefits taxed because I took a large traditional IRA withdrawal in my first year. Didn't affect my benefit amount, but sure hurt at tax time! Also, don't forget that the earnings limit goes up substantially in the year you reach FRA, and disappears completely the month you hit FRA.

SSA MAKES THIS SO COMPLICATED ON PURPOSE!!! I've been fighting with them for 2 yrs about this. They counted my 401k rollover as income and reduced my benefits!!! Had to hire an attorney to fix it. The whole system is designed to DENY YOU YOUR BENEFITS!!

I had same questions when i retired in 2023. heres what i learned... For SS earnings limit: - work income: YES counts - IRA dividends: NO doesnt count - IRA withdrawals: NO doesnt count - capital gains: NO doesnt count - rental income: NO doesnt count (unless ur a real estate professional) Basically if you have to pay FICA/Medicare tax on the income, it counts for the earnings test. If not, it doesn't count. Hope this helps!

To answer your question about when benefits become taxable that you asked above: If your "combined income" (adjusted gross income + nontaxable interest + 1/2 of SS benefits) is: - Below $25,000 (single) or $32,000 (married): 0% of benefits taxable - Between $25,000-$34,000 (single) or $32,000-$44,000 (married): up to 50% of benefits taxable - Above $34,000 (single) or $44,000 (married): up to 85% of benefits taxable Careful planning with Traditional IRA withdrawals can help you stay in lower taxation brackets. Some people do strategic Roth conversions before claiming SS to reduce RMDs later.

If you're having trouble getting through to SSA to ask these questions directly (I spent 3+ hours on hold multiple times), I recommend using Claimyr.com. It's a service that gets you through to a live SSA agent usually within 20 minutes. I was skeptical but used it when I had questions about my ex-spousal benefits that weren't getting answered. You can see how it works in their video demo here: https://youtu.be/Z-BRbJw3puU Worth it for me since I had complex questions about divorced spousal benefits that the online materials didn't clearly address. The SSA rep I spoke with confirmed everything about the earnings test that people mentioned here.

Let me add one important point about survivor vs. divorced spousal benefits that I don't think was clearly addressed yet: 1. Survivor benefits (if your ex has passed away): You can claim as early as age 60, receive 71.5% of their benefit at age 60, up to 100% at your FRA. The earnings test applies until you reach your FRA. 2. Divorced spousal benefits (ex still living): You can claim at 62, receive 32.5% of their PIA at 62, up to 50% at your FRA. The earnings test applies until you reach your FRA. Since you mentioned your ex is still living, you'd be claiming divorced spousal benefits, which is capped at 50% of their PIA (their benefit at their FRA). Also, your strategy of claiming divorced spousal while letting your own benefit grow until 67 only works if you were born before January 2, 1954. If born after that date, filing for any benefit automatically files you for all benefits you're eligible for (called deemed filing).

Unfortunately, yes - if you were born in 1963, deemed filing applies to you. When you file for any benefit, you'll be deemed to have filed for all benefits you're eligible for, and you'll receive the higher of the two (your own or the divorced spousal), not both. This means your strategy of taking divorced spousal while letting your own grow isn't available to you. The law changed with the Bipartisan Budget Act of 2015. Only people born before Jan 2, 1954 were grandfathered into the old rules. Since you mentioned your own benefit would be higher at 67, you're probably better off just waiting to file for any benefits until closer to your FRA, especially if your earnings from working would cause a reduction under the earnings test anyway.

I'm so sorry to hear about the change in your retirement strategy! The deemed filing rule really did eliminate a lot of flexibility for people in your situation. But don't give up hope yet - there might still be some options worth exploring. Since you're planning to retire at 62 and your own benefit will be higher at 67, you might want to consider: 1. Working part-time until your FRA to avoid the early filing reduction penalties 2. If you do need income before 67, remember that the earnings test goes away completely once you reach FRA, so any benefits withheld due to excess earnings get added back to your future payments 3. Consider doing some Roth conversions now while you're still working and in potentially lower tax brackets, to reduce future RMDs that could push you into higher SS taxation brackets Also, make sure to get an updated benefit estimate from SSA that shows both your own projected benefit and the divorced spousal benefit, so you can see exactly what the numbers look like under deemed filing. The silver lining is that at least you found out about this now and can adjust your planning accordingly!