I am 62 and my husband is 64. He's an airline pilot and required to retire in October of next year at 65. He has substantial savings and plans to collect SS at full retirement age of 66 and has substantial income now. I am in real estate and am thinking of retiring when my husband does. Because I earned a lot of $ in the past, my monthly SS benefit at FRA is about the same as my husband's, approx. $2500/mo. If I started collecting now, my benefit would be about $2000. I am tempted to collect because my income in recent years after self-employment expenses has been in the 25-35K range. When researching how much I can earn without reducing my monthly benefit, I see that the threshold is approximately $1740/month. But then I read that I can't work in my business more than 40-45 hours a month to earn that $1740? You would have to have a $38/hr job for those #s to work. Since real estate is straight commission, I'm having a hard time estimating how I could make that work. There are many months where I work way more than 40 hours and don't make anything at all. Other months I may have a big commission check and could stay below the 40 hours. What if I quit real estate entirely and became an Uber driver or a pet sitter just to make the $1740/month? Do the same rules apply if I am still self employed but in another line of work? I would like to do things with a flexible schedule and work I enjoy but still be self employed. I would love to earn $1740 a month being self employed but don't see how it's possible if you can't work more than 40 hours a month. What is your advice? Thanks!

Hi,

I think you're conflating Social Security's annual earnings test (https://www.ssa.gov/planners/retire/whileworking.html) and the monthly test (https://www.ssa.gov/planners/retire/rule.html). The 2018 annual earnings test exempt amount for someone who will not reach age 66 by the end of the year is $17,040, which is an average of $1420 per month. The monthly test is an alternative option that can be used only in the first year of a person's entitlement to benefits if it's more advantageous than the annual earnings test. To qualify for benefits for a particular month using the monthly test in 2018, a person who won't reach age 66 by the end of the year must earn no more than $1420 in wages and not be performing 'substantial services' in self-employment in that month. The substantial service guideline is 45 hours devoted to a trade or business, but as few as 15+ hours per month can be considered substantial services in highly skilled trades such as a medical doctor. The 45 hour guideline would be used for either self-employed real estate agents or Uber drivers.

The important thing to understand is that the annual earnings test and the monthly test are totally separate and distinct. You don't have to meet both tests, just one or the other. And, whichever test ends up being more advantageous is used.

For example, say Joan files for her Social Security benefits at age 63 in January 2018. Her full retirement age rate (PIA) is $2000, but her reduced rate at 63 is $1600. Joan only works seasonally as a self-employed tour guide, devoting at least 150 hours per month to her business in May through September but fewer than 45 hours in all other months. Using the monthly test, Joan could be paid for the months January through April, and for October through December. However, depending on her net earnings for the year, the annual test could be used instead. Say for example that Joan's 2018 net earnings from self-employment (NESE) was $26630. That would exceed the annual earnings test limit by $9600 (i.e. $26630 - $17040), which would require the withholding of $4800 of Joan's 2018 benefits (i.e. $1 of benefits for each $2 of excess earnings), or 3 months of benefits at her monthly rate of $1600.

Thus, in the example above Joan would be better off using the annual earnings test instead of the monthly earnings test, since she would then only lose 3 months of her benefits instead of the 5 months (i.e. May - September) that she would lose under the monthly test.

Both you and your husband appear to have several good options available for claiming your benefits. You should strongly consider using our maximization software in order to explore and compare your options in order to make sure that you don't make a huge mistake by choosing the wrong strategy.

Best, Jerry