Social Security at 62 - must I report $9,500 personal injury settlement?

Congrats on your settlement! I had something similar last year with a car accident settlement for $11k. I DID report it to Social Security and they told me it was a complete waste of time!!! Apparently personal injury settlements are NOT counted as income for Social Security purposes. They only care about EARNED income from working. So a settlement like that doesn't count toward your earnings limit at all.

Personal injury settlements are generally NOT counted as income for Social Security retirement benefit purposes. The earnings limit for 2025 (if you're under Full Retirement Age) only applies to WAGES or SELF-EMPLOYMENT income. A settlement for a slip and fall is considered compensatory for your injury and suffering, not earnings. HOWEVER - if any part of your settlement specifically includes compensation for lost wages, THAT portion could potentially count toward your earnings limit. Most personal injury settlements don't break this out separately though. For peace of mind, you can always call SSA, but be prepared to wait on hold forever. I've had good luck using Claimyr (claimyr.com) to get through to a real person at Social Security without the endless waiting. They have a good video showing how it works: https://youtu.be/Z-BRbJw3puU

my brother got a 15000 setlement from slipping at walmart and social security didnt care at all. only if your working a job they care.

he just didnt mention it to them. his lawyer told him not to bother since its not earnings.

The previous commenters are correct that personal injury settlements generally don't count as income for Social Security retirement benefits, but I want to clarify a couple of important points: 1. For retirement benefits, SSA only cares about EARNED income when applying the earnings limit for early retirees. In 2025, you can earn up to $22,320 without affecting your benefits if you're under Full Retirement Age. 2. However, if any portion of your settlement is explicitly designated as compensation for lost wages/income, that specific portion might need to be reported as it could potentially count as earnings. 3. If you were receiving SSI (Supplemental Security Income) instead of retirement benefits, the rules would be completely different, and you would absolutely need to report the settlement as it could affect eligibility. 4. For SSDI (disability benefits), there are also different reporting requirements. Since you're receiving retirement benefits and this is a straightforward personal injury settlement, you likely don't need to report it unless it specifically includes compensation for lost wages. When in doubt, though, it's always better to report and let SSA determine what's relevant than to not report something that might later cause issues.

When I started collecting early at 62, my financial advisor told me the main thing to watch is work income. I hit a pothole on my bike last year and got a $5k settlement from the city, and I never even thought about telling Social Security about it! Been collecting benefits for 3 years now with no issues. Just make sure you stay under the yearly earnings limit with any job income. That's what can really mess up your benefits when you're collecting early retirement.

Thank you all for the helpful information! I checked my settlement agreement paperwork more carefully, and it's all categorized as compensation for injury, medical expenses, and pain/suffering. Nothing for lost wages. Based on all your advice, it sounds like I don't need to report this to Social Security since it won't affect my retirement benefits. I'll still keep track of my actual work earnings carefully since I'm doing some part-time consulting work and need to stay under that $22,320 limit for 2025. Really appreciate everyone sharing their experiences!

Glad you got it sorted! One more thing - when I had to finally call Social Security about something else, I was on hold for 3.5 HOURS!!! Next time I needed to talk to them, I tried that Claimyr service someone mentioned above and got through in like 20 minutes. Worth every penny just for my sanity lol. Good luck with your new retirement!

Great thread everyone! As someone who just went through the early retirement process myself, I can add that the Social Security Administration has a really helpful publication called "How Work Affects Your Benefits" (Publication No. 05-10069) that breaks down exactly what counts as earnings and what doesn't. Personal injury settlements like yours definitely fall into the "not counted as earnings" category since they're compensatory in nature, not income from work. The key distinction is that SSA only cares about money you EARN through employment or self-employment when applying the earnings test to early retirees. One tip I learned the hard way - if you do end up needing to contact SSA for any reason, try calling right at 8:00 AM when they open. The wait times are usually much shorter first thing in the morning. And definitely keep good records of your part-time consulting income since that's what you'll actually need to track against the annual limit!

This is such a helpful thread! I'm 63 and considering taking early retirement next year, but I've been worried about all the income rules. Reading through everyone's experiences really helps clarify things. I had a minor fender bender last year and might get a small settlement from it - nothing major, maybe $2-3k. It's good to know that won't complicate my Social Security benefits if I decide to start collecting early. The distinction between "earned income" and other types of money makes so much sense when you think about it. @Kyle Wallace - thank you for mentioning that SSA publication! I'm going to download it and read through it before I make my final decision about when to retire. It's so much better to understand these rules upfront rather than trying to figure them out after you've already started benefits.

I'm also dealing with early retirement questions and this thread has been incredibly informative! Just wanted to add one more resource that helped me - the SSA's online retirement estimator tool lets you plug in different scenarios for when to start benefits and what your projected earnings might be. It's really helpful for planning. For anyone else reading this who's considering early retirement, I learned that the earnings limit increases each year (it was $21,240 in 2023, $22,320 in 2024, and will be $23,400 in 2025). So if you're doing any part-time work like @Savannah Weiner mentioned with consulting, make sure you're looking at the current year's limit. Also worth noting - once you reach your Full Retirement Age, the earnings limit disappears completely. So these restrictions are really just for the early retirement period. It's nice to know there's light at the end of the tunnel!

Just wanted to chime in as someone who works in benefits administration - you're absolutely right not to worry about the personal injury settlement! The key thing to remember is that Social Security's earnings test only applies to what they call "countable income," which is essentially money you earn through work or self-employment. Personal injury settlements, insurance payouts, inheritances, gifts, lottery winnings, and similar one-time payments are specifically excluded from the earnings test. The logic is that these aren't compensation for current work activity, so they don't factor into whether you're "retired" or not. Your $9,500 settlement won't affect your monthly benefit amount at all. Just keep tracking that consulting income carefully - that's the only thing SSA cares about for your earnings limit. And congratulations on getting your settlement! Grocery store falls can be really serious, so I'm glad you were able to get some compensation for your troubles.

This has been such an educational thread! As someone who's been working in personal injury law for over 15 years, I can confirm everything that's been said here about settlements not counting as earned income for Social Security purposes. What I always tell my clients is that the IRS and Social Security Administration have very different definitions of "income." For tax purposes, personal injury settlements are generally not taxable income (with some exceptions for punitive damages or interest). For Social Security's earnings test, they're not considered "countable earnings" at all since they're compensatory, not wages. The only time I've seen issues arise is when clients receive structured settlements that include specific language about "lost future earnings" or "wage replacement." Even then, it's usually only problematic if you're receiving ongoing monthly payments designated as wage replacement rather than a lump sum for pain and suffering. @Savannah Weiner - sounds like your settlement is straightforward compensatory damages, so you should be all set. Just keep those settlement documents handy in case you ever need to reference them down the road. And definitely stay on top of tracking that consulting income - that's where people sometimes get tripped up with the annual limits. Great job everyone sharing such helpful real-world experiences!