Social Security earnings limit confusion - lump sum payments after retirement

The earnings test only counts income earned from work, not passive income like rent. So the $6,750 rental payment doesn't count toward the earnings limit at all. The maintenance payment is trickier - if it's actual work performed after retirement, it counts when earned (not when paid). For 2025, the earnings limit will be around $22,320 if your wife is under FRA the whole year (estimating based on current limits plus COLA). Since she'll be retiring in August, you need to count: 1. Her regular salary until August 2. The $4,800 September bonus (counts when paid) 3. The $5,400 maintenance payment (counts when the work was performed, not when paid) If her total 2025 earnings exceed $22,320, she'll lose $1 in benefits for every $2 over the limit. Waiting to start SS until October would avoid the bonus counting against her.

SSA applies the earnings test based on when income is earned, not when it's paid - with some exceptions for special payments like bonuses. I recommend calling the SSA directly to verify how they'll count these specific payments. It's almost impossible to get through on their regular line though. I recently used a service called Claimyr to connect with an agent in under 10 minutes instead of waiting for hours. You can see how it works at https://youtu.be/Z-BRbJw3puU or visit claimyr.com. Saved me hours of frustration and the agent answered all my earnings test questions.

my neighbor had this same issue with a retirement bonus. SSA counted it as a "special payment" since it was for work done before retirement even tho it was paid after. he had to fill out some form to prove it was for past work. forget what its called tho.

Wouldn't she be better off just waiting until her full retirement age to claim SS? Then none of this matters because the earnings test doesn't apply after FRA. That's what I did. So much simpler!

The SSA is HORRIBLE about explaining these rules. When I retired, I had a similar situation with consulting income after retirement. They took back $4,600 in benefits without warning me, then I had to fight for MONTHS to get it sorted out. You really need to get the brother to pay EVERYTHING before she files for benefits. Or restructure when payments happen. The bonus will be a special payment if it's for work before retirement, but they might make you prove it with that SSA-131 form someone mentioned. The maintenance payments are definitely countable earnings. If spread through the year, SSA would count them when earned, but since they're paid in one lump sum in December, they'd likely count all in December unless you can somehow document exactly when each task was performed.

Here's how I would handle this situation: 1. Have your wife start SS benefits in October after receiving the bonus 2. Ask her sister to document when maintenance work was performed and spread out future payments monthly or quarterly 3. Have her employer complete Form SSA-131 for the retirement bonus to classify it as a special payment for work performed before retirement 4. Keep track of her YTD earnings from January-August to ensure she stays under the annual limit when combined with the portion of maintenance work performed after retirement Remember: The monthly earnings test applies in the first year of retirement. This means once she stops substantial work, she can receive full benefits for any month she earns under $1,860 (estimated 2025 monthly limit) regardless of annual earnings.

ALL THIS PROVES Social Security is a BROKEN SYSTEM designed to punish people for working!!! I lost $8,700 in benefits last year because I went 3 months over their stupid limit when I was helping my son with his business. I had NO IDEA until they sent me a notice saying I owed it all back!!! They literally ENCOURAGE people not to work with these rules!!

One more important point: While any benefits withheld due to the earnings test are not lost forever. When your wife reaches full retirement age, SSA will recalculate her benefit amount to credit back the months when benefits were withheld. This means her monthly benefit will permanently increase at FRA to account for the months she didn't receive benefits due to the earnings test. Many people don't realize this and think withheld benefits are just lost.

Not to get off topic but make sure ur checking the tax implications to! When I retired at 63 I had SS + part time work and got surprised by how social security is taxed when u have other income. Up to 85% of benefits can be taxable if ur over certain thresholds.