If you are working and also receiving Social Security benefits, once you have reached full retirement age there is no limit on the amount you can earn. Your Social Security benefits will not be affected. If you have not yet reached full retirement age, you can earn up to a certain amount each year ($14,160 as of 2012) without having your Social Security benefits affected.
If you earn over that amount, your benefits will be reduced $1 for each $2 you earn before the year you reach full retirement age. In the year you reach full retirement age your benefits are reduced by $1 for each $3 you earn over a limit of $38,880 (as of 2012). Only the earnings before the month you reach full retirement age count toward that limit.
But what if you are laid off from your job and are receiving unemployment benefits? Do those benefits affect your Social Security benefits? According to the U.S. Social Security Administration, no, unemployment insurance benefits do not affect your Social Security benefits because unemployment benefits are not included in the annual earnings test.
If you receive severance benefits when you are laid off, those benefits should not affect your Social Security benefits. Lynn Brenner, a personal finance columnist and business writer, quotes Jane Zanca, a Social Security Administration spokeswoman in New York, as pointing out that severance pay, bonuses, and accumulated vacation and sick pay are considered special payments that do not count as wages for purposes of the Social Security earnings test for determining a reduction of benefits. But since severance pay is reported to the Social Security Administration as wages, it is important to get a letter from your employer indicating the amount you received as severance pay.
The fact that you are receiving Social Security benefits does not affect your unemployment benefits in most states. In the past, state unemployment benefits could be offset for people receiving Social Security benefits. But as explained by Bob Skladany in AARP, a federal law was passed allowing the states to decide whether or not to offset unemployment benefits. As of the date of Skladany’s article (November 2010), only Illinois, Louisiana, and Virginia still had an offset rule, and South Dakota was in the process of implementing a repeal of the rule. As reported by Sue Lindsey for AARP in June 2011, Virginia repealed the offset rule.
In Minnesota, social security retirement benefits may affect your unemployment benefits, depending on the date of the claim. According to the Minnesota Unemployment Insurance website, if the date of the claim for Social Security benefits is before the start of the base period, the Social Security benefits do not affect your unemployment benefits. But if the date of the claim for Social Security benefits is after the start of the base period, your unemployment benefits are reduced by 50% of the weekly amount of the Social Security benefits.
Sources:
Bob Skladanay, “Can I Collect Unemployment and Social Security?”, AARP
I’m Getting Severance Pay – Will That Reduce My Social Security Benefit?, Lynn Brenner’s Family Finance
Income That Reduces or Delays Payment, Minnesota Unemployment
Receiving Social Security and unemployment at the same time, U.S. Social Security Administration
Retirement Planner: Getting Benefits While Working, U.S. Social Security Administration
Sue Lindsey, “Legislature Responds to Outcry”, AARP
Unemployment Insurance Benefits Handbook, State of Illinois Department of Employment Security
Reference:
- Five Reasons for Seniors to Work Part Time After Retirement: voices.yahoo.com/five-reasons-seniors-work-part-time-after-retirement-166110.html?cat
- Helpful Tips for Applying for Unemployment Benefits: voices.yahoo.com/helpful-tips-applying-unemployment-benefits-4104469.html?cat=3
- Your Retirement Benefit: How It Is Figured: www.ssa.gov/pubs/10070.html
