Social Security denied me at 65 due to high severance pay - must I wait until all money is gone?
I'm in a frustrating situation with Social Security and need advice! I was laid off when my department was eliminated, and I'm receiving severance until December 2025. I'm 65 now and will turn 66 in April 2025 (my FRA is later). I applied for SS retirement benefits but got denied because my severance pay is 'too high' according to the SSA letter. This severance is literally my only income right now, and I can't even touch my pension until after the severance period ends. I'm absolutely stunned that Social Security expects me to wait until my savings are completely depleted before I can get MY benefits that I've paid into for decades! I live in Georgia if that matters for any state rules. Does anyone know if there's any way around this or do I really have to wait until after December when my severance ends to reapply? I'm worried about the gap between when my money runs out and when benefits would actually start.
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Paolo Ricci
This sounds like you're running into the Social Security earnings test. For 2025, if you're under Full Retirement Age (FRA) and earn over $24,260 (this year's limit), SSA reduces your benefits by $1 for every $2 you earn above that limit. They're counting your severance as earnings. You don't actually have to wait until your money is gone - you need to wait until your income falls below the annual limit or until you reach your Full Retirement Age, whichever comes first. Since you'll be 66 in April 2025, you'll hit the year of FRA earnings test which is more generous ($64,680 with $1 reduction for every $3 over).
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GalaxyGuardian
•Thanks for explaining this. So they're treating my severance like I'm still working? That seems so unfair since I was FORCED out of my position! So if my severance ends in December 2025, would I be eligible to apply in January when that income stops? Or would I need to wait until after April when I turn 66?
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Amina Toure
the same thing hapened to my sister!!! she got laid off with 6 months pay and SSA said No Way until the severence was done! its ridiculoue you paid into it your whole life but they treat you like your trying to cheat or something
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GalaxyGuardian
•Exactly! I worked 40+ years and paid into the system, and now when I need it they're telling me no because my former employer is still paying me what I EARNED. Did your sister just have to wait it out?
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Oliver Zimmermann
You've encountered the Annual Earnings Test (AET). There's some nuance here that might help you: 1. SSA doesn't actually want you to spend all your money before applying - they're applying the earnings limit test because you're under your Full Retirement Age (FRA). 2. If your severance payments end in December 2025, and you turn 66 in April 2025, you should actually qualify under the higher earnings limit for the year you reach FRA ($64,680 for 2025). 3. If your monthly severance divided across the year doesn't exceed the earnings threshold, you might qualify for partial benefits now. 4. Once you reach FRA, the earnings test disappears completely, so after your birthday in April, earnings won't affect your benefits at all. I recommend requesting a reconsideration with specific calculations showing either: (a) your annualized severance doesn't exceed limits, or (b) you qualify under the higher FRA-year limit since you turn 66 next year.
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GalaxyGuardian
•This is actually super helpful! My severance is about $3,450 per month, which comes out to $41,400 annually. That's over the regular limit but under the FRA-year limit you mentioned. So since I turn 66 in 2025, should I be eligible under that higher limit? If so, it sounds like I should request reconsideration right away.
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Natasha Volkova
wait i'm confused why is severance even counting as "earnings"?? Its not like your working anymore, its basically like unemployment right?
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Paolo Ricci
•Severance is treated differently than unemployment. The IRS and SSA consider severance as wages for services performed, not as unemployment compensation. It shows up on your W-2 just like regular wages and is subject to the earnings test. Unemployment benefits, on the other hand, don't count toward the earnings test.
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Javier Torres
This happened to my husband last year and we were FURIOUS! Social Security counts severance as "earnings" even though you're not working anymore! Such a broken system. You basically have two options: 1. Wait until your severance ends and apply then 2. Apply for reconsideration and argue that your monthly amount when spread over the entire year falls under the limit for the year you reach FRA We ended up just waiting it out because fighting with SSA was more stress than it was worth. The whole process is RIGGED against workers! They make it impossible to reach anyone on the phone too, I spent HOURS listening to that terrible hold music.
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Emma Davis
•I know this is frustrating, but there's actually a way to get through to SSA without the hours-long wait. I used a service called Claimyr (claimyr.com) that holds your place in line and calls you when an agent is available. Saved me literally 3 hours of hold time when I was dealing with my own earnings test issue. They have a video that shows how it works: https://youtu.be/Z-BRbJw3puU if you're interested. Made a huge difference in my stress levels during my application process!
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CosmicCaptain
I recommend you contact your local Congressperson's office. I had a similar issue and their constituent services helped push my case through. Most people don't realize that congressional offices have dedicated staff who can cut through SSA red tape. They can't change the rules, but they can make sure your case gets proper attention.
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GalaxyGuardian
•That's a fantastic idea I hadn't considered! I'll look up my representative's office information right now. Did you just call their local office or did you need to submit something in writing?
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Amina Toure
my friend got around this by asking her company to pay the severence as a lump sum instead of monthly payments. then it only counted for ONE month of earnings not the whole year. maybe to late for you but might help someone else reading this!
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Oliver Zimmermann
•This is an important point. The timing and structure of severance can make a big difference. Lump sum severance in January counts only for January earnings. However, I should note that if the lump sum is large enough, it could still cause benefits to be withheld for several months until the reduction is satisfied. But overall, it can be more advantageous than having severance spread across many months.
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GalaxyGuardian
Update: I called Social Security this morning (after trying for THREE DAYS) and finally spoke with someone helpful. She explained that since I'm turning 66 in 2025, I AM eligible for the higher earnings limit of $64,680, and my severance of $41,400 annually falls under that! I'm submitting a reconsideration request tomorrow with my severance documentation. She also said that because I'm applying in the year I reach FRA, they'll only count earnings before the month I turn 66. So earnings after April won't count against me at all! Thanks everyone for your help navigating this confusing system.
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Paolo Ricci
•That's great news! And you've highlighted something important - in the year you reach FRA, SSA only counts earnings in the months BEFORE your birthday month. So from January-March 2025, you'll be under the higher earnings limit, and from April onward, no earnings test applies at all. Good luck with your reconsideration!
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Natasha Volkova
so confusing!! i thought social security was supposed to be SIMPLE! why do they make everything so complicated with all these different rules and tests??
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Oliver Zimmermann
•The complexity comes from how the program has evolved over decades. The earnings test exists to balance the original purpose of Social Security (replacing income when you're no longer working) with the reality that many people phase into retirement gradually. But you're right that the average person shouldn't need specialized knowledge to access benefits they've earned. This is why staying informed and asking questions like the original poster did is so important.
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Makayla Shoemaker
Congratulations on getting through to SSA and getting that clarification! Your experience is a perfect example of why it's so important to push back when you get an initial denial - many people just accept the first "no" without realizing there might be exceptions or special rules that apply to their situation. The fact that you're in your FRA year makes a huge difference, and it sounds like the original reviewer may not have caught that detail. Keep us posted on how your reconsideration goes - your success story could help others in similar situations!
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Omar Hassan
•This is such a helpful thread! As someone new to navigating Social Security, I had no idea about the earnings test or how severance payments are treated. @GalaxyGuardian your persistence really paid off, and it's encouraging to see that there are knowledgeable people here willing to help explain these complex rules. I'm bookmarking this discussion for future reference - the distinction between regular earnings limits and FRA-year limits could be crucial for anyone in a similar situation. Thanks to everyone who contributed their expertise!
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