Can Social Security penalize me for earnings before my retirement application date in 2025?
I'm turning 63 next year but won't reach my full retirement age until 2027. I'm planning to file for Social Security benefits starting June 1, 2025. From January through May 2025, I expect to earn about $20,000 from my current job. After I start collecting benefits, I would reduce my hours to stay under the monthly earnings limit (around $1,900/month). My question is: Will SSA penalize me for the $20,000 I earned BEFORE I started collecting benefits? Or does the earnings test only apply after I start receiving payments? I'm worried they might look at my total 2025 income at tax time and demand repayment in 2026 even though most of my earnings were before I started collecting SS. Anyone know how this works?
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Gianna Scott
The monthly earnings test applies in your first year of retirement. Since you're applying for benefits starting in June, SSA will only count your earnings from June-December 2025 when applying the earnings limit. The $20,000 you earn January-May won't affect your benefits as long as you stay under the monthly limit after you start collecting. Just make sure you report to SSA that you're retiring in June when you apply. They need to know you've had a significant change in work pattern to apply the monthly earnings test instead of the annual test.
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Edwards Hugo
•That's a huge relief! So I just need to make it clear I'm 'retiring' in June (even though I'll still work part-time), and then stay under the monthly limit for the rest of 2025? Will they verify my pre-June earnings somehow?
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Alfredo Lugo
They absolutely WILL look at your total annual earnings eventually! My brother thought the same thing last year and got hit with an overpayment notice this April. SSA compared his total earnings from his W-2 against what he reported monthly and said he exceeded the annual limit. Now he owes them $4,600! The monthly rule is a TRAP.
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Gianna Scott
•That's not correct. If your brother properly notified SSA that he retired mid-year and stayed under the monthly limit after retirement, he should appeal that overpayment determination. The monthly earnings test is specifically designed for people who retire mid-year. It sounds like something went wrong with how his situation was processed.
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Sydney Torres
Ran into this exact situation! The key is proving to SSA that you had a "significant change in work pattern" - meaning you went from earning above the limit to staying below it. Make sure you document EVERYTHING - last day at full-time job, start of reduced hours, etc. The monthly test absolutely applies but you need to be super clear with SSA about your retirement date.
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Edwards Hugo
•Thanks for sharing your experience. When you say document everything, what kind of proof did they ask for? I'll get a letter from my employer about the reduced hours starting in June.
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Kaitlyn Jenkins
ur overthinking this. just stay under the yearly limit which is like $22k or something for 2025 if ur under FRA. monthly limit only matters if u make over the yearly amount.
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Gianna Scott
•That's not accurate for someone retiring mid-year. The annual earnings test (around $22,320 in 2025 for those under FRA) applies if you're already retired all year. But in the first year you claim benefits, you can use the monthly test instead if you have a significant change in work pattern, which is what OP is describing.
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Caleb Bell
When I applied for early benefits in 2024, I had similar concerns about the earnings test. The monthly test is what you need, but reaching a real person at Social Security to confirm everything was a nightmare - 2+ hour hold times and kept getting disconnected. I finally used Claimyr (claimyr.com) to get through to an agent after multiple failed attempts. They got me connected to an SSA rep in under 20 minutes who confirmed I was handling the monthly earnings limit correctly. They have a demo video showing how it works: https://youtu.be/Z-BRbJw3puU
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Kaitlyn Jenkins
•or just go to ur local office...way easier than waiting on the phone
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Caleb Bell
•My local office was booked 6 weeks out for appointments. For time-sensitive questions like this, waiting that long wasn't an option.
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Danielle Campbell
The way I understand the rule is this: In your FIRST year of retirement, SSA gives you a break by only counting earnings in months AFTER you start benefits. BUT - and this is important - you have to actually RETIRE (or reduce work) when you claim benefits. If you keep working the same job with the same hours, they'll use the annual test instead. So your plan to reduce hours in June should work fine as long as you properly document it.
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Edwards Hugo
•Yes, I'll definitely be reducing my hours - going from 40 hours to about 15 hours per week. My monthly income will drop from around $4000 to about $1500, which should keep me under the limit.
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Rhett Bowman
I'm going thru this EXACT THING right now!!! Applied last july, worked jan-june making $19k then cut back hours. In January got a notice saying i was overpaid $3200 because i made too much for the year!! Had to appeal and provide pay stubs showing my hours dropped. STILL waiting for a decision 3 months later. meanwhile they reduced my check to recover the "overpayment"!! This system is BROKEN!!!!
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Sydney Torres
•That sounds frustrating! Did you specifically tell them when you applied that you were retiring mid-year? Sometimes the form doesn't make this clear and they default to the annual test.
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Rhett Bowman
•YES i told them!!! The person who took my application even said "ok we'll apply the monthly test since you're retiring in June" but somehow that never got entered in their system!!
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Gianna Scott
To clarify for everyone: When you apply for benefits in your first year of retirement, you need to: 1) Tell SSA you're retiring or significantly reducing work that month 2) Stay under the monthly limit for each month you receive benefits 3) Verify they coded your application for the monthly earnings test 4) Keep documentation of your work reduction If you do all that, then yes, your pre-retirement earnings in 2025 won't count against you. But you must actually reduce your work when you say you're going to.
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Edwards Hugo
•This is super helpful - thank you! I'll make sure to explicitly request the monthly earnings test when I apply and have documentation ready about my reduced hours starting in June.
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