Retiree's $30,000 On-Call Pay Triggers Social Security Benefit Cut

A 63-year-old retired oilfield electrician took a $30,000 on-call retainer from his former employer, which triggered Social Security's earnings test, potentially causing $2,760 in withheld benefits. The earnings test applies to people collecting Social Security before full retirement age, which is 67 for anyone born in 1960 or later.

The $30,000 on-call retainer exceeds the 2026 earnings limit of $24,480 by $5,520. According to Social Security's rules, $1 is withheld for every $2 earned above the annual limit. In this case, the excess earnings of $5,520 could result in $2,760 in withheld Social Security benefits.

The retirement earnings test does not apply to people collecting Social Security at or after full retirement age. However, for those collecting benefits before full retirement age, the test can significantly impact their benefits. Workers can avoid benefit withholding by delaying the retainer or Social Security until full retirement age, when the earnings test disappears entirely.

Social Security's earnings test counts various types of income, including standby or retainer pay, as earned income. This means that even if the worker is never dispatched, the retainer pay is still considered earned income and can trigger the earnings test. On the other hand, certain types of income, such as royalties from creative work completed before claiming Social Security, may not count against the earnings test.

## What it means for retirees The story of the retired oilfield electrician highlights the importance of understanding Social Security's earnings test and how it can impact benefits. Retirees who take on part-time or on-call work may be subject to the earnings test, which can result in withheld benefits. It is essential for retirees to consider the potential impact of the earnings test on their benefits and plan accordingly.

## Why it matters The earnings test can have significant implications for retirees who rely on Social Security benefits as a primary source of income. Withholding benefits can impact a retiree's financial security and standard of living. It is crucial for retirees to understand the rules surrounding the earnings test and plan their retirement income accordingly. By doing so, they can minimize the impact of the earnings test and ensure a more stable financial future.

The earnings test is not unique to oilfield workers; it applies to anyone collecting Social Security before full retirement age. Many retirees, including those in the utility, healthcare, and manufacturing sectors, may be subject to the earnings test if they take on part-time or on-call work. Understanding the rules and implications of the earnings test can help retirees make informed decisions about their retirement income and plan for a more secure financial future.