Can SS retirement benefits be penalized for high income BEFORE starting benefits mid-year?
I've got a tricky situation with my early retirement and income limits. Due to unexpected back problems requiring two surgeries, I had to stop my full-time job at age 65 (one year before my FRA of 66). I worked January through June 2024 at my regular salary (about $72,000 annually), then started receiving Social Security benefits on July 1, 2024. I picked up some part-time consulting work from July through mid-September but kept it under the monthly earnings limit (made about $1,450/month). My question is: will Social Security penalize my benefits for the $36,000 I earned in the first half of the year BEFORE I started collecting benefits? I thought income only counts against you after you start receiving SS, but my neighbor said they look at the whole calendar year. Really worried about possibly owing money back to SSA!
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Arnav Bengali
Good news - in the year you first retire mid-year, SSA can apply a Monthly Earnings Test rather than the Annual Earnings Test. This means they only count earnings in months AFTER you started receiving benefits. So your January-June earnings shouldn't affect your benefits as long as you stayed under the monthly limit after starting benefits in July. However, you need to formally notify SSA that you've retired mid-year to trigger this special rule. Have you done that? Also, make sure you're using the correct monthly limit ($1,770 for 2024 if you're under FRA).
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Scarlett Forster
•Thank you so much! I wasn't aware I needed to formally notify them of mid-year retirement. I haven't done that yet - do I just call the main SSA number to tell them? And thanks for the monthly limit correction. I've been keeping it under $1,500 per month to be safe, so I guess I'm okay there.
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Sayid Hassan
ur fine dont worry about it. SS only looks at income after u start getting benefits in first year. but next year they look at ALL income for whole year
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Scarlett Forster
•Thanks! That's reassuring. So next year (2025) I need to be more careful about total annual income? I was planning to do some consulting but will make sure to stay under the annual limit until I hit my full retirement age.
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Rachel Tao
When I retired in 2023, I was so confused about this! The Annual vs Monthly Earnings Test for first year of retirement is EXTREMELY confusing. I spent weeks trying to get a straight answer from SSA about how my pre-retirement income would affect my benefits. I called the SS office FIVE times and got disconnected or was on hold forever each time!! Finally got through to someone who explained it to me - the other comments are right about the monthly test. But definitely call and notify SSA officially about your retirement situation to be safe.
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Derek Olson
•I had the same nightmare trying to reach SSA about my earnings test questions! After being on hold for 3+ hours and getting disconnected twice, I tried Claimyr.com and got through to an agent in 20 minutes. They have a service that calls SSA for you and connects you once an agent is on the line. Saved me so much frustration! They have a video showing how it works at https://youtu.be/Z-BRbJw3puU if anyone's interested. Worth it for important issues like this earnings test question that need a clear answer.
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Danielle Mays
Just to clarify some technical details: What you're referring to is called the "special earnings test rule" that applies only in your first year of retirement. Under this rule, SSA only counts earnings in months AFTER your entitlement to benefits begins. For 2024, the monthly exempt amount if you're under FRA is $1,770. For every $2 you earn above that threshold in any month after starting benefits, $1 is withheld. Your $36,000 pre-benefit earnings won't count, but you MUST inform SSA that you've retired mid-year to trigger this rule. This isn't automatic. Call and specifically state you're requesting the monthly earnings test for your first year of retirement.
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Scarlett Forster
•This is super helpful! I definitely need to call SSA right away to make sure they know I retired mid-year. Is there any specific documentation I should have ready when I call?
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Roger Romero
Wait I'm confused... I thought SS always looks at your total annual income? My brother got hit with a huge overpayment notice because he made too much the year he retired, even though he only worked the first few months of that year.
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Danielle Mays
•Your brother likely didn't notify SSA he retired mid-year, so they defaulted to the annual test. The monthly test is only applied when you specifically request it and meet the definition of retirement (not earning over the monthly limit in any month you receive benefits). It's a common mistake that leads to exactly the situation you described.
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Anna Kerber
The EXACT same thing happened to me last year!!! I retired in June 2023 due to health issues (heart problems in my case) and started benefits in July. I was TERRIFIED about my pre-retirement income causing problems. My advice: DOCUMENT EVERYTHING! I kept a detailed log of all my work after starting benefits - dates, hours, payments. When I got a letter from SSA questioning my work activity, I had everything ready to show I stayed under the limits after starting benefits. I had to physically go to my local office twice to get it sorted out, but everything worked out fine once I explained I had retired mid-year.
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Scarlett Forster
•That's a good idea about documenting everything. I have all my paystubs from the part-time work so I can prove I stayed under the limits. Hoping I won't need to make an in-person visit since the closest office is over an hour away.
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Sayid Hassan
btw make sure ur NOT confusing SSI and SSDI with retirement benefits. totally different rules for those programs
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Scarlett Forster
•No confusion there - I'm definitely on regular retirement benefits. Thanks for checking though!
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Arnav Bengali
One more important point: When you reach your Full Retirement Age (FRA), the earnings test disappears completely. So once you turn 66, you can earn unlimited income without any reduction in benefits. Keep that in mind for your future planning.
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Scarlett Forster
•That's great news! I turn 66 next July, so I only need to worry about the earnings limit for one more year. After that, I can take on more consulting work without restrictions. Thanks for pointing that out!
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