Sunday, February 24, 2008

Stock Options


I have stock options that were awarded while I was still working. I am retired now and drawing social security but am not yet at full retirement age. I would like to exercise these options but am concerned over whether they will count toward the earnings limit. The handbook indicates options are considered as wages "at the time of payment". Is this when they were awarded or when they were exercised?
Charles from Texas

The fair market value of stock options when granted is counted as wages at that time. If the options are exercised, then the increase in value is wages when exercised. However, if this exercise occurs after retirement, the "wage" is attributed to the last day of employment for purposes of the earnings limit test, so it will not be counted against you if received after the year you retired.

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