CONSUMERS : Bumpy Spot on the Road to Retirement

Question: I retired Feb. 1, 1988, at 66 years of age. After receiving my January salary, and my benefits accumulated over 24 years of employment, my gross income for 1988 (everything I had received by Feb. 1, 1988) was $8,600 (rounded). As I interpret the Social Security regulations, I must return to them $1 for every $2 gross I earn over $8,400.

Because I am active and like to keep busy, I have been working spasmodically for a temporary agency. I have deposited half of the gross salary I received to date. My gross annual salary to date is $13,500 (rounded). I also receive $350 a month from a retirement plan (total in 1988 of $3,850; no income tax withheld). This brings my gross annual income to $17,388.

I have read all articles I could find, but have never seen this problem addressed. Have I interpreted the Social Security rules correctly? I have also deposited half of my retirement income. Will Social Security expect half of this income as well?

I am sure that others, besides myself, would appreciate clarification of just exactly what Social Security requires in connection with additional earnings over $8,400.--E.H.

Answer: Two points for openers, according to Joe Giglio, the agency’s public affairs specialist: There is no ceiling on “gross” annual income as far as Social Security is concerned. (The Internal Revenue Service is another matter.)

The $8,400 ceiling you refer to is simply the amount you can “earn” either on a salaried job or through free-lance activities. It does not apply to income from retirement benefits, dividend income, interest income or anything else of a similar nature that you receive in the course of the year.

In the second place, the rules about the earnings ceiling (from that “spasmodic” job of yours, for instance) have a different application during your first year of retirement.

This special rule is an acknowledgment on Social Security’s part that few people neatly retire, precisely, on the first day of the year.

In other words, during your first year of retirement, how much you make in gross salary or wages is less important than the monthly breakdown of it.

“She’ll be paid her full, monthly benefit,” Giglio says, “for every month when her earnings don’t exceed one-twelfth of the maximum--and, in her case, that would be every month in which her earnings didn’t exceed $700. The total for the year--$15,000, $20,000, $30,000, whatever--is immaterial.”

And, while we don’t know what the earnings were on this temporary job of yours, it’s highly unlikely that it exceeded $700 in any single month. Most of your gross earnings of $13,500 in ’88 were probably from your last job and were earned during months when you weren’t drawing Social Security benefits anyway.

After the first year, of course, the maximum is firmly in place--although, since it’s based on the national average of salary and wages, it goes up every year. And the ceiling has gone up from $8,400 last year to $8,880 this year. You can’t earn more than $8,800 this year, sure enough, without losing $1 in benefits for every $2 you earn.

But, in all of this, the key word is, again, earn --not how much you gross from retirement benefits, annuities or anything else not resulting from your work.

Neither Giglio nor I can figure out what those mysterious “overpayment” checks that you received from Social Security are all about. And there’s only one way to find out for sure. Please arrange a meeting with someone from Social Security as soon as possible.