There are a number of rules that apply to receiving Social Security benefits and receiving work income for the same time period. To understand these, first differentiate between receiving benefits under the Social Security insurance programs, as compared to receiving benefits under the needs-based program called Supplemental Security Income (SSI). Insurance programs include Social Security Disability Insurance, Retirement Insurance, and dependency or survivors’ benefits such as Child’s Benefits, Wife’s or Husband’s Benefits, and Widow’s or Widower’s Benefits.
If you aren’t sure which benefit you are receiving, insurance benefits are paid on the 3rd or some later day in the month, and SSI is paid on the 1st of the month. Some individuals receive benefits from both programs.
The rule for SSI is simple: Benefits will be reduced dollar for dollar after the first $65 plus one-half the remainder of gross earnings each month. Earnings of a spouse or parent for an eligible child living in the household can also reduce benefits.
However, reductions due to work income and Social Security insurance benefits are more complicated to understand and calculate. These are a few of the rules that apply in 2014:
• If you are receiving retirement, dependency, or survivors’ benefits and under age 66 for the full year, your benefits will be reduced $1 for every $2 that you earn over $15,480.
• If you reach age 66 in 2014, you can earn $41,400 before your birth month without any benefit reduction. Any earnings above that amount reduce benefits $1 for each $3 earned.
• The person whose Social Security record that individual or family benefits are based upon is called the “Worker”. Work earnings of the Worker can also cause reductions in benefits for dependents. Work earnings of dependents will not cause a reduction in the Worker’s benefits.
• Beginning with the month of full retirement age, there is no reduction for work earnings.
• If you receive Disability Insurance, benefits will not be reduced by earnings, but if you earn, or have the capacity to earn, more than $1,080 per month, your benefits will be terminated because you will be no longer considered as disabled. There are a number of programs and special rules that allow additional earnings or reinstatement.
• Total benefits payable on a Worker’s record may be reduced due to the Family Maximum Amount.
• If you receive a government pension and your spouse has a Social Security record allowing benefit payments to you, your dependency or survivors’ benefits may be reduced due to the Government Pension Offset.
• If you are entitled to both Social Security benefits on your own record and a government pension, your Social Security benefits may be reduced due to the Windfall Elimination Provision if you have less than 30 years of Social Security coverage.
In planning your benefit amount before receiving benefits, the application of these rules to your benefits should be verified by contacting the Social Security Administration and specifically applying your own record or entitlement to the inquiry. Many questions can be answered by going online to the Social Security website, www.socialsecurity.gov.
Neal Winston is the principal of Winston Law Group, a Boston law firm specializing in estate planning, probate, special needs planning, elder and disability law. A nationally recognized expert on special needs counseling and trusts, and public benefit programs. Neal is frequently requested to lecture and train other attorneys and professionals that work in this field.