An Elder Law Attorney Can Help Navigate Social Security Benefits

Social Security is a vital source of income for millions of retirees. However, the system’s complexity often leaves people uncertain about how to maximize their benefits. From determining the best time to claim benefits to understanding taxation and spousal eligibility, making incorrect choices can result in a reduced lifetime income and unexpected financial burdens.

An elder law attorney can help individuals and families navigate Social Security rules, ensuring that retirees receive the benefits they are entitled to, while coordinating them with other financial and estate planning strategies.

Determining Eligibility and Maximizing Benefits

Social Security eligibility is determined by a person’s work history, earnings and age at the time of filing. Individuals can begin claiming benefits as early as age 62. However, doing so results in permanently reduced monthly payments. On the other hand, delaying benefits past full retirement age (typically 66 or 67) results in a higher monthly payout.

An elder law attorney can analyze an individual’s financial situation to determine the optimal time to claim benefits. For married couples, strategies such as spousal benefits and survivor benefits can be used to increase total household income. Understanding how to structure claims for a higher-earning spouse versus a lower-earning spouse can have a significant impact on long-term financial security.

Social Security and Tax Implications

Many retirees are surprised to learn that a portion of their Social Security benefits may be subject to federal income tax, depending on their overall income. Up to 85% of benefits can be taxed if an individual’s combined income exceeds certain thresholds. This includes wages, pensions, withdrawals from retirement accounts and investment income.

An elder law attorney can help develop tax-efficient strategies, such as adjusting withdrawal schedules from 401(k) or IRA accounts to minimize taxable income. Proper planning can ensure that retirees keep more of their Social Security income, while staying in a lower tax bracket.

Social Security Benefits for Spouses, Widows and Divorced Individuals

Social Security rules provide benefits not just for workers but also for their spouses, widows and even former spouses. Spousal benefits enable a lower-earning spouse to receive up to 50% of the higher-earning spouse’s benefit, providing a significant financial advantage.

Widows and widowers can claim survivor benefits, allowing them to receive their deceased spouse’s full benefit if it is higher than their own. Divorced individuals may also qualify for benefits based on an ex-spouse’s earnings, provided they were married for at least 10 years and remain unmarried at the time of filing.

Because these rules can be complicated, an elder law attorney helps individuals determine which benefits they qualify for and how to maximize their payout. Choosing the wrong claiming strategy can result in thousands of dollars in lost benefits throughout retirement.

Appealing Denied Social Security Benefits

Not all Social Security claims are approved on the first attempt. If benefits are denied due to missing paperwork, incomplete applications, or eligibility disputes, an elder law attorney can assist with the appeal process.

The Social Security Administration offers multiple levels of appeal, including reconsideration, administrative hearings and federal court review. Without legal guidance, many applicants struggle to present the necessary medical or financial evidence to reverse a denial. An elder law attorney understands how to structure appeals effectively, ensuring that eligible individuals receive the benefits to which they are entitled.

Coordinating Social Security with Other Retirement Income

For most retirees, Social Security is just one part of a broader financial picture. An elder law attorney helps integrate Social Security benefits with pension distributions, investment income and estate planning strategies to ensure long-term financial stability.

Proper planning can help retirees:

Avoid excessive taxes on Social Security income
Ensure that benefits continue for a surviving spouse or dependent
Structure distributions from retirement accounts in a way that preserves government benefits

By taking a comprehensive approach, an elder law attorney ensures that Social Security benefits work in tandem with other financial assets to provide a secure and sustainable retirement.

Key Takeaways

Social Security claiming decisions impact lifetime income: An elder law attorney helps determine the optimal time to file for benefits.
Spousal and survivor benefits can provide additional income: Understanding eligibility rules ensures that married, widowed and divorced individuals receive their full entitlement.
Taxes can reduce Social Security payouts: Strategic financial planning minimizes tax liabilities on benefits.
Legal assistance is critical for appealing denied claims: An attorney can guide individuals through the appeals process to secure rightful benefits.
Social Security should be coordinated with other retirement income sources: Proper planning ensures financial stability in retirement.

References: Super Lawyers (May 7, 2024) “How Do You Become Eligible for Social Security Benefits?”, Social Security Administration (December 2024) “Your Right to Representation“ and AARP (January 17, 2023) “7 Things to Know About Social Security and Taxes”

Social Security Cost of Living (COLA) Is Likely to Increase in 2024

Following two years when Social Security Cost of Living Adjustments (COLAs) soared to the highest levels in decades, beneficiaries should not be surprised by more modest increases in monthly payments in 2024, reports a recent article, “Social Security COLA 2024: How Much Will benefits Increase Next Year?” from AARP.

The inflation gauge used by the Social Security Administration (SSA) to set the annual COLA rose at a 2.6% annual rate for July and 3.4% for August. These are the first two of three months the SSA uses to determine the final increase, which will be announced more formally in October.

The August uptick was a bit higher than anticipated, and September’s inflation numbers are expected to rise to similar levels. Analysts expect a 2024 COLA of about 3 percent.

This may seem like a letdown for recipients. Still, COLA is calculated to exactly offset the price increases faced by consumers, measured by the Consumer Price Index, since the prior COLA was determined.

A 3 percent COLA indicates inflation is slowing down or getting under control, which is especially important for seniors living on a fixed income. While a higher COLA sounds nice, it reflects rising prices, which can be far more challenging for retirees who count on Social Security benefits to pay their household bills.

All forms of benefits are affected by the COLA, including retirement, disability, family, and survivor benefits. The adjustment starts with the December Social Security benefits, which most folks receive in January 2024.

Benefits are calculated by the CPI-W, a subset of the main Consumer Price Index, which measures a broad range of retail prices. The SSA compares the average CPI-W for July, August, and September of each year to the figure for the same period the year before to arrive at the COLA for the year to come.

For example, the year-over-year changes in the CPI-W for the three months in 2022 were 9.1%, 8.7%, and 8.5%, respectively. Over the entire quarter, the index was 8.7% higher than average for the same period in 2021, resulting in the COLA used at the start of 2023.

If projections hold, and there’s no reason to think they won’t, the 2024 adjustment will align more with the relatively low inflation pre-pandemic period. When there’s no inflation, there’s no COLA. This happened in 2010, 2011 and 2016. The most significant adjustment ever? 14.3 percent in 1980.

Studies by the Center for Retirement Research show Social Security benefits generally keep up with inflation in the long term but can lag during short-term periods of volatility, depending on whether or not the price index is trending up or down when the COLA is set.

Beneficiaries in 2021 and 2022 lost buying power when COLAs were outpaced by surging inflation, peaking around 9 percent in mid-2022. This year, inflation was cooling somewhat when the 8.7 increase took effect and remained below the COLA level.

Another factor impacting the COLA’s value is Medicare costs. A rise in Medicare Part B premiums in 2024 would offset a portion of the COLA increase for Social Security recipients who have premiums deducted directly from their benefits, which is about 70 percent of Medicare enrollees.

Reference: AARP (Sep. 13, 2023) “Social Security COLA 2024: How Much Will benefits Increase Next Year?”

Should I Consider Working with an Elder Law Attorney?

Partnering with an elder law expert is the best way to make life transition easier as seniors age. RC Online’s recent article entitled “Why Is It Ideal for Working with An Elder Law Attorney During Life Transitions?” explains that many people have issues in the stage of life when they’re weak and not feeling well. This can result in health or mobility issues for many family members. The challenges faced by the family can cause financial strain, making lifestyle adjustments difficult, the article says.

Elder law attorneys can help family caregivers understand their loved one’s current situation and provide possible future solutions. This includes planning for situations where a debilitating illness requires long-term care.

Elder law attorneys often see various financial and medical circumstances when representing seniors in court, so their assistance can be extremely valuable when addressing issues, such as managing long-term care needs.

Specialized services for elderly care. Elder law attorneys focused on legal matters concerning older individuals. An elderly law attorney will be familiar with the elder laws of your state and will be able to identify potential conflicts or issues easily. As a result, they’ll be able to take appropriate actions to protect their client’s interests and rights.

Long-term care plan development for seniors. An elder care attorney can provide an objective perspective on the kind of care for their elders. This can help create a longevity plan that meets everyone’s needs.

The attorney will focus on families’ issues and problems as parents or spouses age. They provide legal services to individuals facing aging challenges, such as health care decisions and financial planning. An elder law attorney will consider the required level of care and whether a person can remain in their own home or require long-term nursing care.

Help for families in mediation and education. These are critical parts that play an important role during a family’s transitional phase. Mediation helps families maintain communication, and education provides knowledge for handling various issues.

It is important to have legal agreements related to retirement benefits, assets and who will be responsible for caring for an elderly loved one. An elder law attorney can help make these arrangements to prevent family fights and protect assets. They can assist seniors as well as heirs and beneficiaries to prevent losing assets due to financial problems or other circumstances.

Reference: RC Online (Feb. 14, 2023) “Why Is It Ideal for Working with An Elder Law Attorney During Life Transitions?”

How Will Social Security Change Next Year?

Money Talks News’ recent article entitled “5 Ways the Social Security System Will Change in 2023” looks at several ways in which Social Security will change for 2023.

The benefit increase. Social Security recipients will see their monthly payments go up by 8.7% in 2023. That cost-of-living adjustment (COLA) means an extra $146 a month. Not all retirees will see much extra Social Security income in 2023 because the Medicare Part B premium is withheld from some retirees’ Social Security payments.
The earnings limit for working retirees. If you claim Social Security retirement benefits before reaching your full retirement age (FRA) and also continue working, the SSA will withhold some of your benefits, if your income exceeds the earnings limit. This limit generally increases annually as the national average wage index increases. For 2023, it will rise from $19,560 to $21,240 if you reach full retirement age after 2023, and from $51,960 to $56,520 if you reach full retirement age in 2023. However, you don’t lose any benefits withheld due to your income exceeding the applicable earnings limit.
The tax cap on workers’ income. The maximum amount of a worker’s income subject to Social Security payroll taxes will increase from $147,000 in 2022 to $160,200 in 2023. As a result, if you’re lucky enough to earn more than $160,200 in 2023, you won’t owe Social Security payroll taxes on every dollar you earn. The Social Security payroll tax rate itself will remain the same in 2024: 6.2% for employees (employers pay another 6.2% on their employees’ behalf) and 12.4% for the self-employed.

“To receive Social Security retirement benefits, most people need to accumulate at least 40 ‘credits’ during their working lifetime, according to the U.S. Social Security Administration (SSA). Currently, you can earn up to four credits per year, if you work and pay Social Security taxes.”

The earnings required for you to get a Social Security credit, also known as one-quarter of coverage, will go up from $1,510 in 2022 to $1,640 in 2023.

The maximum benefit. There’s a limit to how much money a retiree can get in monthly benefits—the maximum Social Security benefit. Your maximum Social Security benefit is based upon the age at which you retire. The maximum benefit for a person who retires at their full retirement age will go up from $3,345 per month in 2022 to $3,627 per month in 2023.

Reference: Money Talks News (Oct. 13, 2022) “5 Ways the Social Security System Will Change in 2023”

Am I Getting All the Social Security Benefits I Can?

Money Talks News’ recent article entitled “7 Social Security Benefits You May Be Overlooking” says that the Social Security Administration provides payments to spouses, children and those with disabilities, among others. Let’s look at this in detail.

Spousal benefits via a husband or wife. Spouses can get up to half of their husband’s or wife’s monthly benefit. Even stay-at-home spouses without their own work history can claim benefits with this method. You can start claiming spousal benefits as early as age 62. However, benefits are reduced if payments begin before your full retirement age. If you are entitled to your own benefits, as well as spousal benefits, you will get an amount equal to whichever benefit level is greater.
Spousal benefits via an ex-spouse. Even if you are divorced, you may be entitled to get spousal benefits. However, all of the following must apply to your situation:

Your ex-spouse is entitled to receive Social Security benefits;
You were married at least 10 years to your ex-spouse;
You are currently unmarried; and
You are at least 62 years old.

The benefit that you are entitled to get based on your own work is less than the benefit you would receive based on your ex-spouse’s work. Claiming spousal benefits as a divorced person does not impact your ex’s benefit amount. It also does not affect any benefits their current spouse can receive, if they have remarried.

Survivor’s benefits for widows and widowers. If your spouse dies, you may still be able to receive up to 100% of their Social Security retirement benefits. Divorced spouses may also be able to get survivor’s benefits, if they were married for at least 10 years and are now unmarried. Most widows and widowers can begin claiming survivor’s benefits as early as age 60. Those who have a disability and became disabled prior to or within seven years of their spouse’s death can start benefits as early as age 50. In addition, widows and widowers of any age can get survivor’s benefits, if they are caring for a deceased worker’s child who’s younger than age 16 or disabled.
Survivor’s benefits for children. Children can get payments from a deceased parent’s record as well. Survivor’s benefits are available to children up to age 18 (or 19 for if attending elementary or secondary school full-time) These benefits may extend beyond that, if a child becomes disabled and remains disabled before age 22. Depending on the circumstances, grandchildren and stepchildren may also be eligible for these benefits.
Parent’s benefits. Parents who depended on their children for financial support may be eligible to get benefits from Social Security if that child dies. To be eligible , you have to meet a number of criteria, including the following:

The deceased worker must have sufficient work credits to qualify for Social Security benefits;
You must be at least age 62 and, in most cases, cannot be married after the worker’s death;
You must have received at least half of your support from the deceased worker at certain points in time;
You were the natural parent or became the legal adoptive parent or stepparent prior to the worker turning 16 years old; and
You are not eligible for a retirement benefit from Social Security that exceeds the parent’s benefit.

Disability benefits. To get monthly benefits through the Social Security Disability Insurance program you must have a work history that makes you eligible for Social Security and be unable to work now because of a medical condition that is expected to last at least a year or end in death.
Supplemental Security Income. These benefits do not come from Social Security taxes, but rather the program uses general tax dollars to provide benefits to adults and children with disabilities, blindness, or limited income and resources. The SSI program is designed to provide cash assistance for basic needs, such as food, clothing and housing. Because it is funded by general tax revenue, there is no work history requirement to receive these benefits.

Reference: Money Talks News (Feb. 8, 2022) “7 Social Security Benefits You May Be Overlooking”

What’s Elder Law and Do I Need It?

Yahoo News says in its recent article entitled “What Is Elder Law?” that the growing number of elderly in the U.S. has created a need for lawyers trained to serve clients with the distinct needs of seniors.

The National Elder Law Foundation defines elder law as “the legal practice of counseling and representing older persons and persons with special needs, their representatives about the legal aspects of health and long-term care planning, public benefits, surrogate decision-making, legal capacity, the conservation, disposition and administration of estates and the implementation of their decisions concerning such matters, giving due consideration to the applicable tax consequences of the action, or the need for more sophisticated tax expertise.”

The goal of elder law is to ensure that the elderly client’s wishes are honored. It also seeks to protect an elderly client from abuse, neglect and any illegal or unethical violation of their plans and preferences.

Baby boomers, the largest generation in history, have entered retirement age in recent years. Roughly 17% of the country is now over the age of 65. The Census estimates that about one out of every five Americans will be elderly by 2040.

Today’s asset management concerns are much sophisticated and consequential than those of the past. Medical care has not only managed to extend life and physical ability but has itself also grown more sophisticated. Let’s look at some of the most common elder law topics:

Estate Planning. This is an area of law that governs how to manage your assets after death. The term “estate” refers to all of your assets and debts, once you have passed. When a person dies, their estate is everything they own and owe. The estate’s debts are then paid from its assets and anything remaining is distributed among your heirs.

Another part of estate planning in elder law concerns powers of attorney. This may arise as a voluntary form of conservatorship. This power can be limited, such as assigning your accountant the authority to file your taxes on your behalf. It can also be very broad, such as assigning a family member the authority to make medical decisions on your behalf while you are unconscious. A power of attorney can also allow a trusted agent to purchase and sell property, sign contracts and other tasks on your behalf.

Disability and Conservatorship. As you grow older, your body or mind may fail. It is a condition known as incapacitation and legally defined as when an individual is either physically unable to express their wishes (such as being unconscious) or mentally unable to understand the nature and quality of their actions. If this happens, you need someone to help you with activities of daily living. Declaring someone mentally unfit, or mentally incapacitated, is a complicated legal and medical issue. If a physician and the court agree that a person cannot take care of themselves, a third party is placed in charge of their affairs. This is known as a conservatorship or guardianship. In most cases, the conservator will have broad authority over the adult’s financial, medical and personal life.

Government programs. Everyone over 65 will, most likely, interact with Medicare. This program provides no- or low-cost healthcare. Social Security is the retirement benefits program. For seniors, understanding how these programs work is critical.

Healthcare. As we get older, health care is an increasingly important part of our financial and personal life. Elder law can entail helping a senior understand their rights and responsibilities when it comes to healthcare, such as long-term care planning and transitioning to a long-term care facility.

Reference: Yahoo News (Jan. 26, 2020) “What Is Elder Law?”

Will Moving to a New State Impact My Estate Planning?

Since the coronavirus pandemic hit the U.S., baby boomers have been speeding up their retirement plans. Many Americans have also been moving to new states. For retirees, the non-financial considerations often revolve around weather, proximity to grandchildren and access to quality healthcare and other services.

Forbes’ recent article entitled “Thinking of Retiring and Moving? Consider the Financial Implications First” provides some considerations for retirees who may set off on a move.

Income tax rates. Before moving to a new state, you should know how much income you’re likely to be generating in retirement. It’s equally essential to understand what type of income you’re going to generate. Your income as well as the type of income you receive could significantly influence your economic health as a retiree, after you make your move. Before moving to a new state, look into the tax code of your prospective new state. Many states have flat income tax rates, such as Massachusetts at 5%. The states that have no income tax include Alaska, Florida, Nevada, Texas, Washington, South Dakota and Wyoming. Other states that don’t have flat income tax rates may be attractive or unattractive, based on your level of income. Another important consideration is the tax treatment of Social Security income, pension income and retirement plan income. Some states treat this income just like any other source of income, while others offer preferential treatment to the income that retirees typically enjoy.
Housing costs. The cost of housing varies dramatically from state to state and from city to city, so understand how your housing costs are likely to change. You should also consider the cost of buying a home, maintenance costs, insurance and property taxes. Property taxes may vary by state and also by county. Insurance costs can also vary.
Sales taxes. Some states (New Hampshire, Oregon, Montana, Delaware and Alaska) have no sales taxes. However, most states have a sales tax of some kind, which generally adds to the cost of living. California has the highest sales tax, currently at 7.5%, then comes Tennessee, Rhode Island, New Jersey, Mississippi and Indiana, each with a sales tax of 7%. Many other places also have a county sales tax and a city sales tax. You should also research those taxes.
The state’s financial health. Examine the health of the state pension systems where you are thinking about moving. The states with the highest level of unfunded pension debts include Connecticut, Illinois, Alaska, New Jersey and Hawaii. They each have unfunded state pensions at a level of more than 20% of their state GDP. If you’re thinking about moving to one of those states, you’re more apt to see tax increases in the future because of the huge financial obligations of these states.
The overall cost of living. Examine your budget to see the extent to which your annual living expenses might increase or decrease in your new location because food, healthcare and transportation costs can vary by location. If your costs are going to go up, that should be all right, provided you have the financial resources to fund a larger expense budget. Be sure that you’ve accounted for the differences before you move.
Estate planning considerations. If this is going to be your last move, it’s likely that the laws of your new state will apply to your estate after you die. Many states don’t have an estate or gift tax, which means your estate and gifts will only be subject to federal tax laws. However, a number of states, such as Maryland and Iowa, have a state estate tax.

You should talk to an experienced estate planning attorney about the estate and gift tax implications of your move.

Reference: Forbes (Nov. 30, 2021) “Thinking of Retiring and Moving? Consider the Financial Implications First”

Will Social Security Get a Raise in 2022?

The COLA increase in Social Security is welcomed by seniors depending upon their benefits but the timing varies, says the article “Social Security Benefits Get a 5.9% Raise This Year–Here’s When You Should See That Extra Money” from the Lincoln Journal Star. Here’s what you can expect.

The first benefit check or automatic deposit should arrive with the 5.9% COLA. However, the timing depends upon your date of birth. If your birthday falls between the first and the 10^th of the month, those benefits should arrive on the second Wednesday of the month, so by January 12, you’ve should have received your first Social Security benefit with the COLA.

What if your birthday is between the 11^th and 20^th of the month? Benefits should arrive by the third Wednesday of the month. That’s a raise on January 19.

And if your birthday is late in the month, between the 21^st and 31^st, expect your benefits on the fourth Wednesday of the month—that would be January 26.

A caveat—if you’re collecting Social Security but have not yet enrolled in Medicare, then you’ll see a monthly increase of 5.9%. However, if you’ve enrolled in Medicare Part B and pay premiums directly from your benefits, your increase will be less. This is the push me—pull you of Social Security COLAs.

Medicare Part B premiums have increased, from $148.50 in 2021 to $171.10 in 2022, a total increase of $21.60. So, while you may have hoped for a true 5.9% increase, subtract the COLA from your premium hike to see what monthly benefit you’ll really get.

The annual deductible for all Medicare Part B beneficiaries is $233 in 2022. That’s a $30 increase from the $203 annual deductible in 2021.

Yes, this is the biggest COLA increase in a long time, as we have been in a low inflation environment for a very long time. If possible, it would be wise to take your COLA increase and set it aside to create or enhance a financial cushion. However, when living costs for everything from food to gas keep going up, it’s simply not possible for most people to save.

The reason this year’s COLA was so large is because of the high inflation rates from the third quarter of 2021. If inflation had been less, so would have been the increase. We don’t know what the future of Social Security will be, or what future COLAs will be. However, if at all possible, building in a little security of your own is the best recommendation.

Reference: Lincoln Journal Star (Jan. 7, 2022) “Social Security Benefits Get a 5.9% Raise This Year–Here’s When You Should See That Extra Money”

What Power Does an Executor Have?

Being asked to serve as an executor is a big compliment with potential pitfalls, advises the recent article “How to Prepare to Be an Executor of an Estate” from U.S. News & World Report. You are being asked because you are considered trustworthy and able to handle complex tasks. That’s flattering, of course, but there’s a lot to know before making a final decision about taking on the job.

An executor of an estate helps file paperwork, close accounts, distribute assets of the deceased, deal with probate and any court filings and navigate family dynamics. Some of the tasks include:

Locating critical documents, like the will, any trusts, deeds, vehicle titles, etc.
Obtaining death certificates.
Overseeing funeral arrangements and memorial services, if any.
Filing the will in probate court.
Creating an estate bank account, after obtaining an estate tax number (EIN).
Notifying organizations, including Social Security, pension accounts, etc.
Paying creditors.
Distributing assets.
Overseeing the sale or transfer of real estate
Filing estate tax returns and final tax returns.

If you are asked to become the executor of an estate for a loved one, it’s a good idea to gather as much information as possible while the person is still living. It will be far easier to tackle the tasks, if you have been set up to succeed. Find out where their estate planning documents are and read the documents to make sure you understand them. If you don’t understand, ask, and keep asking until you do. Similarly, obtain information about all assets, including joint assets. Find out if there are any family members who may pose a challenge to the estate.

Today’s assets include digital assets. Ask for a complete list of the person’s online accounts, usernames and passwords. You will also need access to their devices: desktop computer, laptop, tablet, phone and smart watch. Discuss what they want to happen to each account and see if there is an option for you to become a co-owner of the account or a legacy contact.

Many opt to have an estate planning attorney manage some or all of these tasks, as they can be very overwhelming. Frankly, it’s hard to administer an estate at the same time you’re grieving the loss of a loved one.

As executor, you are a fiduciary, meaning you’re legally required to put the deceased’s interests above your own. This includes managing the estate’s assets. If the person owned a home, you would need to secure the property, pay the mortgage and/or property taxes and maintain the property until it is sold or transferred to an heir. Financial accounts need to be managed, including investment accounts.

The amount of time this process will take, depends on the complexity and size of the estate. Most estates take at least twelve months to complete all of the administrative work. It is a big commitment and can feel like a second job.

A few things vary by state. Convicted felons are never permitted to serve as executors, regardless of what the will says. A sole executor must be a U.S. citizen, although a non-citizen can be a co-executor, if the other co-executor is a citizen. Rules also vary from state to state regarding being paid for your time. Most states permit a percentage of the size of the estate, which must be considered earned income and reported on tax returns.

Be very thorough and careful in documenting every decision made as the executor to protect yourself from any future challenges. This is one job where trying to do it on your own could have long-term effects on your relationship with the family and financial liability, so take it seriously. If it’s too much, an estate planning attorney can help.

Reference: U.S. News & World Report (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

What are Earnings Limits for Disability Retirees?

If you are 60 or older, there’s no restriction on the amount of income you can earn while receiving disability retirement.

However, if you’re under age 60, you can earn income from work while also receiving disability retirement benefits. Note that your disability annuity will cease, if the United States Office of Personnel Management determines that you’re able to earn an income that’s near to what your earnings would be if you’d continued working.

Fed Week’s recent article entitled “The Limits on Earnings for Disability Retirees” says that the retirement law has set an earnings limit of 80% for you to still keep getting your disability retirement. You reach the 80% earnings limit (or are “restored to earning capacity”) if, in any calendar year, your income from wages and self-employment is at least 80% of the current rate of basic pay for the position from which you retired.

All income from wages and self-employment that you actually get plus deferred income that you actually earned in the calendar year is considered “earnings.” Any money received before your retirement isn’t considered “earnings.”

The government says that income from wages includes any salary received while working for someone else (including overtime, vacation pay, etc.). Income from self-employment is any net profit you made from working or managing your own business—whether at home or elsewhere. Net profit is the amount that’s left after deducting business expenses and before the deduction of any personal expenses or exemptions as allowed by the IRS. Deferred income is any income you earned but didn’t receive in the calendar year for which you’re claiming income below the 80% earnings limitation.

If you’re reemployed in federal service, and your salary is reduced by the gross amount of your annuity, the gross amount of your salary before the reduction is considered “earnings” during the calendar year.

The following aren’t considered earnings:

Gifts
Pensions and annuities
Social Security benefits
Insurance proceeds
Unemployment compensation
Rents and royalties not involving or resulting from personal services
Interest and dividends not resulting from your own trade or business
Money earned prior to retirement
Inheritances
Capital gains
Prizes and awards
Fellowships and scholarships; and
Net business losses.

If you’re under age 60 and reemployed in a position equivalent to the position you held at retirement, the Office of Personnel Management will find you recovered from your disability and will cut off your annuity payments.

Reference: Fed Week (Nov. 4, 2021) “The Limits on Earnings for Disability Retirees”

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