Will profit sharing lump sum from 1994 job affect my new Social Security retirement benefits?
Hey everyone! Just found out I might be eligible for a surprise lump sum payment from profit sharing at a company I left back in 1994 (talk about delayed compensation!). I'm about to receive my first Social Security retirement check next month in February, and I'm worried about how this might affect things. If I do get this unexpected money, will SSA consider it as "earned income" for 2025? I'm below my Full Retirement Age and I know there are earnings limits, but is profit sharing from 30+ years ago counted the same way as regular wages? I really don't want to mess up my benefits right as they're starting. Has anyone dealt with receiving unexpected backpay or profit sharing after starting Social Security? What happened with your benefits?
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Natalia Stone
Good news! Profit sharing payments from previous employment typically aren't counted as earned income for Social Security earnings test purposes. The earnings test only applies to wages you earn from actual work or self-employment in 2025. Since this money was essentially earned back in 1994, it shouldn't affect your current benefits. However, you should definitely report it to the SSA when you receive it, just to be on the safe side. Keep documentation showing when the profit sharing was actually earned (1994) versus when it was paid to you.
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Nolan Carter
•That's a huge relief! I was afraid they might reduce my benefit amount or make me pay something back. Do you happen to know if I need to report it on a specific form, or just call my local office?
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Tasia Synder
watch out cuz ssa counts all kinds of stuff as income even when it shouldnt. my cousin got a insurance settlement and they counted it even tho it wasnt from working!! better check with them directly
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Selena Bautista
•There's actually an important distinction here. SSI (Supplemental Security Income) and Social Security retirement benefits have different rules for income. SSI counts almost all income and resources, while retirement benefits only apply the earnings test to actual wages and self-employment income. Insurance settlements typically don't affect retirement benefits but can affect SSI eligibility.
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Mohamed Anderson
Congrats on the unexpected windfall! When I started collecting last year, I was so confused about all the income rules. I kept thinking everything would count against me - rental income, dividends, even when I sold some old furniture online! Turns out most of that stuff doesn't matter for the earnings test.
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Nolan Carter
•Thanks! Yeah, it's all super confusing. I've been reading the SSA website but sometimes the explanations just lead to more questions!
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Ellie Perry
I HAD THIS EXACT SITUATION 2 years ago!! Company I left in the 80s sent me $12,000 from an old pension plan. SSA gave me HELL about it, took 3 MONTHS to get it sorted that it wasn't counted as earnings. Had to call them 14 TIMES and got disconnected EVERY SINGLE TIME. Their phone system is BROKEN ON PURPOSE to discourage people from getting help!!!!!
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Landon Morgan
•I feel your frustration! The SSA phone system is notoriously difficult to navigate. When I needed to reach them about a similar issue last month, I used a service called Claimyr (claimyr.com) that got me connected to an agent without the endless hold times. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU It saved me hours of frustration, especially since these profit sharing/back payment situations often require speaking directly with a knowledgeable agent who can properly code it in their system.
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Ellie Perry
•THANK YOU! Will check this out next time I need to call them (which knowing SSA will be SOON since they mess up everything)!
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Teresa Boyd
im confused isnt profit sharing like dividends? i get dividends and i dont report those with my ss... they never asked me to
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Natalia Stone
•Profit sharing plans are different from stock dividends. They're employer-sponsored retirement or compensation plans where companies contribute a portion of profits to employees. The good news is that neither profit sharing distributions nor stock dividends count as earned income for the Social Security earnings test - only wages and self-employment income do.
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Selena Bautista
To give you a definitive answer: No, profit sharing from 1994 will not count as earned income for your Social Security earnings limit in 2025. Here's why: 1. The SSA earnings test only counts income earned from actual work performed during the year you're receiving benefits 2. This profit sharing is essentially deferred compensation from work performed in 1994 3. Unearned income (investments, pensions, insurance, profit sharing, etc.) doesn't count toward the earnings test limit When you receive the money, keep documentation showing it's from employment that ended in 1994. Report it to SSA, but clearly indicate it's from past employment and not current work activity. This shouldn't affect your benefits at all, but proper documentation will prevent any confusion.
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Nolan Carter
•Thank you so much for the detailed explanation! This makes me feel much better. I'll make sure to have all my paperwork ready when I report it.
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Mohamed Anderson
One thing nobody mentioned - might have tax implications even if it doesn't affect your SS benefits! My accountant said unexpected income like this can sometimes push you into higher Medicare IRMAA brackets even if it doesn't count for the earnings test. Just something else to think about...
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Nolan Carter
•Oh wow, I hadn't even considered the Medicare angle. I'm not on Medicare yet but that's definitely something to keep in mind for future planning. The tax system makes everything so complicated!
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Tasia Synder
my mom got a backpayment from her old job and ss never even knew about it so maybe just dont tell them lol
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Selena Bautista
•That's not advisable. While this profit sharing amount likely won't affect retirement benefits, failing to report income that you're legally required to report can lead to bigger problems down the road, including potential overpayments that would need to be repaid with penalties. It's always best to be transparent with Social Security about any significant income.
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