Clarifying the Earnings Test Confusion

If you claimed your retirement benefits before reaching your full retirement age and you continue to work, you are likely highly aware of the Retirement Earnings Test. The government limits how much you can earn from an employer or self-employment before they begin temporarily withholding a portion of your Social Security payments. Understandably, working retirees often panic at the thought of a $2,000 payment pushing them over that strict annual limit.

You can breathe easy on this front. The Social Security Administration strictly defines what counts toward the earnings limit: W-2 wages and net earnings from self-employment. The earnings test explicitly excludes investment dividends, pension payouts, IRA withdrawals, capital gains, and government stimulus payments.

A direct check from the Treasury is unearned income. It will not trigger the earnings test, and it will not cause the government to withhold a single dime of your monthly checks, regardless of your age.