Will the Social Security Earnings Penalty Affect Me?

Q. I've been told to notify Social Security about any "special payments" that I receive from my employer when I retire and file for benefits. What are special payments?

A. Special payments are payments you receive after you retire — for work you did while you were still employed. Usually, those payments will not affect your Social Security benefit. Such payments include severance pay, bonuses, accumulated sick pay, back pay or vacation pay, sales commissions, or other forms of compensation earned before you retired.

If you receive special payments, you should notify Social Security so that the agency will not count those payments as postretirement earnings. Otherwise, you may run into the earnings limit and temporarily lose some of your benefits. Or you may receive a letter from Social Security asking you to repay money you've received.

It is a good idea, when you retire, to ask your employer for a letter stating the various payments you are receiving for work previously done or benefits accumulated while you were employed. The letter should go to Social Security as proof of your special payments.

Stan Hinden, a former columnist for the Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question for the Social Security Mailbox? Check out the archive. If you don't find your answer there, send a query.