Social Security earnings limit confusion - can I retire midyear after exceeding annual limit?

You're asking about the monthly earnings test exception that applies to midyear retirees. Here's how it works: Even though you'll exceed the annual limit of $23,400 in the first half of the year, SSA will apply the monthly earnings test for the remainder of 2025 since it's your first year of retirement. You can receive your full SS benefit for any month you earn $1,950 or less AND you're not performing substantial services in self-employment. So yes, the clock essentially 'resets' when you retire midyear, as long as you stay under the monthly limit from July-December.

My brother ran into this EXACT same situation last yr!! The SSA rep told him since he was retiring in the middle of the year they would use the monthly test not the yearly one. He got benefits starting the month after he retired even tho he made like 35k before retiring!

I'd be careful about this. When I retired midyear in 2023, I misunderstood how this worked and ended up with an overpayment notice because I did some consulting work later in the year that put me over the monthly limit for those months. Make sure you stay under $1,950 EACH month after you retire, not just on average. And if you earn even $1 over in any month, you'll lose benefits for that specific month.

this is actually not totally right!! the SS earnings limit is SO confusing. you only lose $1 in benefits for every $2 you earn over the limit. so if your monthly benefit is like $2000 and you make $6000 over the annual limit they take away $3000 total spread across the year. I got tripped up by this when I retired. ALSO you gotta report your expected earnings to SSA when you apply

I went through the exact same situation last year! I had earned about $38,000 by May 2024 before claiming SS at 63. I was worried I'd get nothing for the rest of the year, but when I applied, the SSA rep explained they use the "grace year" rule for the first year you retire. I got my full benefit for June-December since I didn't earn more than $1,850 (that was last year's monthly limit) in those months. Just make SURE to declare on your application that you're retiring and will earn less than the monthly limit going forward. They'll ask for an estimate of your future earnings.

It's part of the standard questions. When you apply, they'll ask if you're retired or planning to retire, and ask for your estimated earnings for the year. Just make sure to clearly explain you're retiring in July and won't be earning more than the monthly limit afterward. That triggers them to apply the monthly earnings test instead of the annual one. I'd recommend applying about 3 months before you want benefits to begin.

My aunt just went thru this and the SSA kept gving her different answers every time she called!! She wasted HOURS on hold only to get disconnected or told something different. Finally she used a service called Claimyr (claimyr.com) that got her connected to an agent in under 5 minutes! They have a video showing how it works: https://youtu.be/Z-BRbJw3puU - totally worth it to get a clear answer from an actual SSA person rather than guessing. The agent confirmed she could get benefits using the monthly test even though she exceeded the annual amount.

Just be careful about one other thing - if you have any vacation pay, sick leave payout, or bonuses paid after you stop working, those still count as earnings in the month you receive them! My husband got a lump sum payout of unused vacation in July after retiring in June and it pushed him over the monthly limit for July, so no benefits that month. Plan accordingly and maybe ask your employer if they can pay out any final amounts before you retire.

One last important point about the earnings test: Once you reach your Full Retirement Age (FRA), the earnings test no longer applies. So this is only a temporary concern until you reach your FRA, at which point you can earn unlimited income without any reduction in benefits. And any benefits withheld due to the earnings test before FRA will result in a small permanent increase to your monthly benefit once you reach FRA.

Just wanted to add one more tip from my experience - when you do apply, make sure to keep detailed records of your monthly earnings after retirement. SSA may ask for verification later, and having pay stubs or other documentation ready can save you a lot of headaches. Also, if you're planning any freelance or contract work after retiring, be extra careful about how payments are structured. Sometimes payments for work done before retirement but paid after can still count toward your earnings in the month received. I learned this the hard way when a client paid me in August for work I completed in May - it still counted as August earnings even though the work was done months earlier!

I went through this exact situation when I retired at 64 in 2022! The key thing to understand is that SSA has a special "grace year" rule for first-year retirees. Even though you'll exceed the $23,400 annual limit by June, you can still receive full Social Security benefits for July through December as long as you earn $1,950 or less per month during those months. When you apply, make sure to clearly state that you're retiring in July and estimate your post-retirement monthly earnings. The SSA will automatically apply whichever test is more favorable to you - in your case, definitely the monthly test. I'd recommend applying in April to allow processing time. Also, be very careful about any final payouts from your employer (vacation, sick leave, bonuses) as these count as earnings in the month you receive them, not when you earned them. Good luck with your retirement!

I'm in a similar situation planning to retire at 65 next year, and this thread has been incredibly educational! One thing I wanted to add based on my research - make sure to also consider state taxes on your Social Security benefits if applicable. Some states don't tax SS benefits at all, while others do, and this could affect your overall retirement planning alongside the earnings test considerations. Also, if you're married, your spouse's income generally doesn't count toward the earnings test, which can be helpful for household planning. The grace year rule really seems like a lifesaver for people in your situation - I had no idea SSA would apply whichever test is more favorable!

I'm also approaching this situation and want to thank everyone for sharing their experiences! One additional resource that might be helpful - the SSA website has a retirement earnings test calculator that can help estimate how the earnings test might affect your benefits. It's under their "Plan for Retirement" section. Also, I've heard that if you're unsure about any aspect of this, you can schedule an appointment at your local SSA office rather than trying to get through on the phone. The in-person appointments tend to be more thorough and you can bring documents with you. For someone like Jamal who's dealing with a midyear retirement, having all the details in writing from an SSA representative could provide great peace of mind before making the final decision to retire in July.

I just wanted to chime in as someone who recently went through this process - the advice here is spot on about the monthly earnings test for first-year retirees! I retired at 63 last year after earning well over the annual limit in my first few months of work. The key is being very clear on your application that you're permanently retiring from your career job and will only have minimal earnings (under $1,950/month) going forward. One thing I'd add is to also think about any retirement account withdrawals or pension payments you might receive - these generally DON'T count as earnings for the Social Security earnings test, only wages and self-employment income do. So if you're planning to supplement your income with 401k withdrawals or pension payments, those won't affect your Social Security benefits under the earnings test. The whole system is definitely confusing at first, but once you understand the grace year rule it makes much more sense!

As someone who works in retirement planning, I can confirm what others have shared about the "grace year" rule - it's one of the most misunderstood aspects of Social Security! The key point is that SSA will automatically apply whichever earnings test is MORE FAVORABLE to you in your first year of retirement. Since you're retiring midyear after already exceeding the annual limit, they'll definitely use the monthly test ($1,950/month) for July-December. One additional tip: when you apply, be very specific about your retirement date and future earnings expectations. SSA needs to clearly understand that you're making a permanent work status change, not just taking a temporary break. Also, if you have any employer-sponsored benefits that might pay out after retirement (like unused sick time), coordinate the timing carefully since these count as earnings in the month received. The grace year rule really does work as described here - I've helped many clients navigate this successfully!