Social Security earnings limit confusion - annual $23,400 or monthly $1,950 if retiring mid-year at 62?
Hi everyone - I'm planning to retire this August at age 62 (about 4 years before my Full Retirement Age). My company is downsizing and honestly, I'm mentally checked out anyway. I know there's that earnings test where they take back $1 for every $2 I earn above the limit, but I'm confused about how the earnings limit works when you retire partway through the year. For 2025, the annual limit is $23,400, but do they prorate that since I'll only be retired for part of the year? Or is there a monthly limit of $1,950 they'd use instead for the remaining months? I've already earned about $48,000 so far this year through my job. I'm too exhausted to keep working but terrified of messing this up and having to pay back benefits. Can someone please explain how this works? My brain is completely fried from stress.
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Sebastian Scott
In your situation, SSA will apply the monthly grace period rule since you're retiring mid-year. For the remainder of 2025 after you retire, you can earn up to $1,950 per month without losing benefits. The annual limit doesn't apply to you this year because you're stopping substantial work mid-year. Your pre-retirement earnings of $48,000 won't affect your benefits as long as you stay under that $1,950/month after retirement. Make sure you actually STOP substantial work though - that means no more than $1,950/month for the rest of the year. If you go over even once in any month, you don't get benefits for that month. For 2026, you'll switch to the annual limit ($23,400 plus whatever COLA they add for next year), assuming you don't return to substantial work.
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Sarah Jones
•Thank you! So even though I've already earned way over $23,400 this year, they'll ignore those pre-retirement earnings and just look at what I make after I retire in August? That's a huge relief if true!
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Emily Sanjay
i thought SS always uses the yearly amount no matter when u retire?? my uncle lost benefits last year cuz he made too much before retiring. someone at SS told him the annual limit was all that mattered
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Sebastian Scott
•Your uncle might have been in a different situation or gotten incorrect information. The monthly earnings test (what SSA calls the "grace year" rule) specifically applies when you retire mid-year. It's right on their website, but even some SSA reps get this wrong sometimes.
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Jordan Walker
When I retired at 63, I had to call Social Security THREE TIMES to get a straight answer about this exact issue!!! The first rep told me the annual limit applied no matter what, the second gave me some complicated formula, and the third FINALLY explained the monthly grace period rule correctly. It's INFURIATING how hard it is to get accurate information from them. I wasted HOURS on hold only to get contradictory information each time!!! How are we supposed to make proper retirement decisions when even THEY don't know their own rules???
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Natalie Adams
•I had the same frustrating experience! After wasting days trying to get through on the phone, I found a service called Claimyr that got me connected to a real SSA agent in about 20 minutes. Saved me hours of redial hell. They have a demo video at https://youtu.be/Z-BRbJw3puU showing how it works. The agent I spoke with confirmed that the monthly earnings test applies to the remainder of the calendar year after you retire mid-year, so you don't have to worry about earnings before retirement.
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Elijah O'Reilly
just be super careful when they ask if you're retired or not. when i told them i was retiring in July last year, they asked if i "stopped substantial services" - those exact words. i said yes cuz i stopped my main job but was doing some consulting that paid like $900 a month. apparently that still counted as being retired for their monthly rule!
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Sarah Jones
•Thanks for mentioning this. I might do some light consulting after I retire too, but I'll definitely stay under that $1,950 monthly limit. Did they give you any hassle about the consulting work?
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Amara Torres
I'm going through the exact same scenario right now! The stress is unbelievable. Thanks for asking this question - I was about to post it myself. Just to clarify what I'm understanding: if I retire in September 2025, they'll only look at my earnings from September-December, and I can make up to $1,950 in each of those months without penalty? And all my earnings from January-August are completely ignored?
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Olivia Van-Cleve
•That's correct! The monthly earnings test works EXACTLY like that in your first year of retirement. But starting January 2026, they'll switch you to the annual limit (which will be $23,400 plus whatever COLA they add for 2026). I went through this when I retired in May 2023. The monthly limit is actually super helpful because I had already earned over the annual limit before retiring, but I was still able to get full SS benefits for the rest of that year as long as I stayed under the monthly amount after retirement. Just keep good records of your post-retirement earnings - they may ask for proof later!
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Elijah O'Reilly
one more thing - if u mess up and earn too much in any month after retiring this year, u only lose benefits for THAT month, not the whole year. next year is when they start looking at the whole annual amount
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Sarah Jones
This has been incredibly helpful, everyone. I think I have it straight now. For 2025 after I retire in August: - Only my post-retirement earnings matter (August-December) - I can earn up to $1,950 per month without penalty - If I go over in any month, I lose benefits just for that month - My $48,000 pre-retirement earnings don't count against me Then starting in 2026, I switch to the annual limit of $23,400 (plus whatever COLA they add). I feel like I can actually breathe now. Thank you all so much!
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