Social Security at 64: Confused about 2025 earnings limits and mid-year retirement

The SSA earnings test works differently in the first year you claim benefits compared to full calendar years. There's good news for your situation! In your first year of benefits (2025), SSA will give you the option to use a monthly earnings test rather than the annual one. This is called the "first year rule" or "grace year rule." So for 2025, any earnings BEFORE you start collecting benefits won't count against you. After you begin collecting in August, you'll be subject to a monthly earnings limit (probably around $1,750/month for 2025), but only for months you're actually receiving benefits. And yes, you're right - Social Security pays a month behind, so your September payment will be for August.

ur financial planner should kno this stuff!! mine told me about the monthly test when i retired and filed last yr. but watch out cuz the monthly test is only available in ur first year. after 2025 you'll be on the annual test and subject to giveback if u make too much. I think in 2025 it'll be like $22k or something for the yr if ur under FRA

The SSA looks at your gross wages when applying the earnings test, not your net income after deductions. 401k contributions won't help reduce your countable income for the earnings test. I'll add that the monthly earnings test in your first year is very valuable in your situation. For someone turning 64 in 2025, your annual exempt amount will likely be around $22,320 (the 2024 amount is $21,240, and it typically increases each year with inflation). Without the monthly test option, your high earnings in the first part of the year would definitely cause benefit reductions. But with the monthly test, as long as you earn under about $1,860/month after claiming in August, you won't lose any benefits. This special rule for the first year of retirement is detailed in SSA's Program Operations Manual System (POMS) section RS 02501.030.

I did this last year!!!! Filed at 63 and worked part time. They DO count it in the month it's paid, not when you earned it. My Christmas bonus pushed me over the limit for December and they took back my whole check for that month. So annoying!!!

The whole system is designed to PUNISH people who keep working!!! My brother lost $7000 in benefits last year because he made $3000 too much. How is that fair? The government wants us all dependent and poor. And good luck getting through to anyone at SSA who can actually explain these rules clearly. I've been on hold for HOURS multiple times.

To address your bonus question: Yes, SSA counts income when it's paid, not when it's earned. If you receive a year-end bonus in December after starting benefits, it counts toward December's earnings. However, there's a potential strategy: If your employer can pay the bonus before you start claiming benefits in August, it won't count against your earnings test at all. Might be worth asking your HR department if that's possible. Also, just to clarify a common misconception from one of the comments above: while the earnings test can seem punitive, benefits withheld due to excess earnings aren't permanently lost. Once you reach Full Retirement Age (which for someone born in 1961 is 67), SSA will recalculate your benefit to give credit for months when benefits were withheld.

Yes, PTO payouts count as earnings in the month they're paid for the earnings test. If possible, you might want to arrange to have your PTO payout occur before you start claiming Social Security. Another option would be to use all your PTO before retirement instead of taking the cash payout, if your employer allows it. That way you could effectively stop working earlier while still receiving your regular salary (which would count as earnings during those last weeks/months). But the most important thing to understand is that in your first year of benefits, you have the monthly earnings test option, which makes your pre-claim earnings irrelevant to the earnings test calculation.

I've been helping my dad with the exact same situation! For part-time work after you claim, keep in mind that if you're self-employed, SSA looks at both your earnings AND your work activity. Even if you don't pay yourself much, if you're working a lot of hours they can still count it as substantial earnings. This tripped up my dad who continued managing his rental properties after claiming. Just something to consider if your part-time work might involve self-employment.