Today’s column addresses questions about whether — and when — severance and paid time off count as wages under Social Security’s earnings test, some potential effects of filing early and some requirements for divorced spousal benefits to be paid. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
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Do My Severance Pay, PTO & Vacation Pay Count As Earned Income For Social Security?
Hi Larry, I started receiving my Social Security widow’s benefits January 2019. I just received a letter stating that they cannot pay my benefits from January 2019 through April 2019 because I was working. I was not working. I was on temporary disability collecting New Jersey short term disability and disability through the company that I worked for. I was given severance compensation, paid PTO and vacation pay. Can these payments show as earned income?
When I applied to Social Security, I asked if can I receive temporary disability and widow’s benefits and was told yes and now they are looking for me to return $10k. Thanks, Amy
Hi Amy, Yes. Any compensation you received for which you received a W-2 form would likely be considered to be earned income for purposes of the Social Security earnings test, but if you last worked in 2018 then anything you were paid in 2019 could likely be excluded from counting toward the 2019 earnings test. Social Security refers to that type of compensation as a special wage payment (SWP), and they use a specific form (SSA-131) to document that type of payment.
Based on your description, it sounds like you can probably get Social Security to remove the overpayment that you’ve been notified of by having your former employer complete a form SSA-131 and submitting in to Social Security. It might work best to start out by calling Social Security to explain the circumstances, though. Best, Larry
Will My Wife Receive More If She Files For Spousal Benefits?
Hi Larry, My wife and I both will retire in 2022. I will be 62 and she will be 63. Social Security shows her at $750 a month and me at $1,950 a month at that time. Would she receive more if she filed for spousal benefits? Thanks, Tomás
Hi Tomás, Your wife can’t file for spousal benefits without being required to file for her own benefits at the same time. If you’re drawing your retirement benefits and if your primary insurance amount (PIA), which is equal to your full retirement age (FRA) retirement benefit amount, is more than twice as much as your wife’s PIA, she would then be paid her own benefit plus a partial, or excess, spousal benefit. If she starts drawing prior to full retirement age (FRA), each benefit rate would