Soc Sec penalty question

[sailfish]

Does anyone know if severance pay after being laid off is subject to the 2:1 income penalty? I will be 63 at the time of being let go ,( I will be retiring and saving a younger person's job) I will get a total of a years salary payable once a month until finished. This would determine if I apply for SS benefit or wait until severance is used up.
Thanks

 

[Animorph]

I can't answer about SS directly. My severance pay looked indistinguishable from my regular pay. I just kept getting a normal paycheck. The company would even verify that I was employed! So I would think SS would treat it as earned income.

Dan

 

[kaneohe]

Ask SS for the real answer. My guess is that it would subject you to the penalty bc
it would be income time-coincident w/ the SS. Strange thing is that if you got the severance as a lump sum, there would be no penalty (I guess if SS starts after you receive the lump sum?). You may want to inquire further about the nature of that penalty. I don't know the details but my impression is that somehow the lost income from the penalty eventually starts getting paid back to you
perhaps after your full retirement age. Don't know how long before you are made whole. Maybe ask SS about that too.