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Special payments could affect Social Security benefits

Q: After retiring in 2011, I started my Social Security this year and work part-time. Recently I received unexpected earnings from work done last year, before I retired, that will put my 2012 earnings over annual earnings test amounts. Will I have to return some of my 2012 Social Security benefits?

A: Probably not but you should discuss the details with a SSA representative. The Social Security annual earnings test, also called the retirement test, can reduce SSA benefits in a calendar year based on your wages or self-employment. Earnings test amounts vary based on your actual age compared to your full retirement age (FRA).

As here, sometimes payments are received after retirement for work done before starting Social Security benefits.

Called "special payments," these usually these do not affect Social Security benefits. Key to a special payment is that the last thing you did to earn it was completed before you stopped working.

Examples can include accumulated vacation or sick pay, bonuses and commissions. If self-employed, net income received after the first year you retire is a special payment if you performed the services to earn the payment before becoming entitled to receive Social Security.

Insurance salespeople and farmers are two local occupations often receiving special payments for Social Security purposes. Insurance commissions for policies sold before retirement but received after the year of retirement are usually special payments. If a farmer fully harvested and stored a crop before or in the month of entitlement to SSA benefits, and then carried it over for sale in the next year, the income is likely a special payment will not affect benefits for the year of sale.

Contact Social Security if you think you received a special payment.