Investment income not factored in

Question: I just retired at 62 and get about $4,000 per month in income from my investments. If I claim Social Security, will my benefits be reduced?

Answer: The Social Security earnings test can certainly reduce your retirement benefits if your income is too high and you haven’t reached your full retirement age yet, which you haven’t.

In 2018, Social Security benefits can be reduced if you make more than $17,040 and will reach full retirement age after 2018, at the rate of $1 for every $2 in excess income.

There’s a separate, more lenient earnings test that applies if you’ll reach full retirement age during 2018, and if you’ve already reached full retirement age, there are no earnings restrictions for Social Security beneficiaries.

However, you don’t need to worry. When the Social Security Administration applies its earnings test, only earned income is considered, such as wages from a job or profits from a business you own and operate.

Investment income doesn’t count, nor do capital gains, pension income or income from any annuities you have.

In other words, it doesn’t matter if your investments are paying you $1,000, $10,000 or $1 million a month. If you don’t have income from a job or a business you actively participate in, your Social Security benefits won’t be reduced.