Ask Larry

Hi Larry. My wife is retiring from General Motors on 4/1/2023. She applied for SS prior to becoming avavaible for and unaware that she will be receiving a substantial severance package. Her SS will become effective sometime after her 4/1/2023 retirement date and payout unknown at this time.
My question is, will the severance be considered a "Special Pyment" in the eyes of SS? I have received conflicting answers from SS employees depending on who I ask the question to.
I would appreciate an answer from you with your knowledge of Social Security on this question.
Thank you,
Doug

Hi Doug. Assuming that your wife's severance pay is a payment made on account of retirement (https://secure.ssa.gov/apps10/poms.nsf/lnx/0302505045), then yes it could be considered as a special wage payment (SWP) and would not be counted for purposes of Social Security's earnings test. However, Social Security will only receive a copy of your wife's W-2 form, so in order to get the severance pay excluded as an SWP your wife would need to submit to Social Security a form SSA-131 (https://www.ssa.gov/forms/ssa-131.pdf) that's completed by her employer. Note, though, that the earnings test only applies up until a person reaches their full retirement age (FRA), so the form SSA-131 will only be necessary if your wife is under FRA.

By the way, if your wife hasn't already done so she should strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to fully compare and analyze all of her various filing options in order to make sure that she chooses the best strategy for maximizing her benefits.

Best, Jerry