For some retirees, retirement does not mean every dollar earned afterward will automatically affect their Social Security benefits.
Consider a Vermont sugarmaker who retires with about 800 gallons of finished maple syrup sitting in a barn. The syrup was produced before the retiree began collecting Social Security. Months later, customers buy the remaining inventory and the money comes in during the following year.
Could those sales reduce Social Security benefits?
Not necessarily. The answer can depend on when the work that produced the income actually happened. The syrup was already finished.
ALSO READ: Prince George’s bizarre Eton life
Social Security has an earnings test that can reduce benefits for some people who claim retirement benefits before reaching full retirement age and continue working.
But self-employment income received after benefits begin can sometimes be excluded from that test if it is not tied to significant services performed after entitlement started.
That distinction is especially important for farmers, growers and other small-business owners who may receive money long after the work was completed.
The Social Security Administration specifically addresses situations involving crops or products completed by or before the month a person becomes entitled to benefits.
In the maple syrup example, the key question is simple: Was the syrup already produced before Social Security benefits began?
If the answer is yes, selling that existing inventory later may be treated differently from producing new syrup after retirement.
ALSO READ: Social Security payments are arriving on this date
Selling old syrup is different from making new syrup
The timing matters because selling a finished product is not necessarily the same as performing new work.
A retiree could spend the following spring contacting wholesalers, arranging deliveries and selling syrup that was already bottled or stored before retirement. Those activities may not be considered significant services if the underlying product was completely produced before entitlement to Social Security began.
