How do special payments I received after I retired affect my Social Security retirement benefits? (2024)

FAQs

How do special payments I received after I retired affect my Social Security retirement benefits? ›

Usually, those payments will not affect your Social Security benefit if they are for work done before you retired. This fact sheet describes some of the more common types of special payments, helps you to decide if you received any, and tells you what steps to take if you did. What qualifies as a special payment?

Your Social Security benefit might be reduced if you get a pension from an employer who wasn't required to withhold Social Security taxes. This reduction is called the “Windfall Elimination Provision” (WEP). It most commonly affects government work or work in other countries.

When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you're self-employed. We include bonuses, commissions, and vacation pay.

It may reduce the monthly SSI you receive or make you ineligible for SSI. This is because your income and resources can affect your monthly SSI amount.

Special payments are payments you receive after you retire for work you did before you started getting Social Security benefits. Special payments include bonuses, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions, and retirement payments.

We don't count pensions, annuities, investment income, interest, veterans benefits, or other government or military retirement benefits. Your benefits may increase when you work: As long as you continue to work, even if you are receiving benefits, you will continue to pay Social Security taxes on your earnings.

Can you collect Social Security and a pension at the same time? You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.

High Earners

After their income hits a certain level, their Social Security withholding stops for the year. Officially known as the wage base limit, the threshold changes every year. The 2023 limit for paying FICA taxes is $160,200, and the 2024 limit for paying FICA taxes is $168,600.

Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.

What affects Social Security retirement benefits? ›

If there were some years you didn't work or had low earnings, your benefit amount may be lower than if you had worked steadily. The age at which you decide to retire also affects your benefit. If you retire at age 62, the earliest possible Social Security retirement age, your benefit will be lower than if you wait.

SSDI payments are not affected by having a house, a car, money in the bank, or owning other possessions. On the other hand, many SSI clients are surprised to learn that assets do affect their benefits.

You must report all income, assets, and other aid, including money recovered from a personal injury lawsuit. However, you can take steps to lessen this impact and protect your SSI benefits while pursuing a personal injury lawsuit, such as establishing a special needs trust.

Social Security tax FAQs

Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.

The special rule lets us pay a full Social Security check for any whole month we consider you retired, regardless of your yearly earnings.

A pension. This is what it is called in much of Europe and Canada. In the USA it usually refers only to a company pension, since most would call Social Security payments “social security”. In Canada people would often call the equivalent “my CPP”, but that is the Canadian Pension Plan.

How much will my Social Security benefits be reduced? We'll reduce your Social Security benefits by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits.

Table of Contents. Your military pension does not affect your Social Security benefits. You'll get your full Social Security benefit based on your earnings. Survivors benefits may affect benefits payable under the optional Department of Defense Survivors Benefit Plan.

We reduce your benefits if you start early by about 0.5 percentage points on average for each month you start receiving benefits before your full retirement age. For example, if your full retirement age is 67, and you sign up for Social Security when you're 62, you would only get about 70% of your full benefit.

Taxes on Pension Income

You may owe federal income tax at your regular rate as you receive the money from pension annuities and periodic pension payments. But if you take a direct lump-sum payout from your pension instead, you must pay the total tax due when you file your return for the year you receive the money.