Hello,
I will be retiring in March of 2018. I will be 60 and collecting widows benefits. I have three months of income for 2018 which will amount to approximately $10,800. I will also be getting a lump sum payment for vacation days which will total about $7,500, which will put me over the earnings limit. Does social security count this lump sum payment towards earnings? If so how would I be penalized?
Thank you,
Dorie

Hi Dorie,

If any of your vacation days were earned and available for your use prior to 2018, Social Security should be able to subtract them when determining your countable earnings for the 2018 earnings test. However, Social Security normally only receives a copy of your W-2 form so they won't know about your vacation pay unless you tell them. You may want to ask your employer to complete a form SSA-131 (https://www.ssa.gov/forms/ssa-131.pdf) in order to document your excludable vacation pay.

Best, Jerry