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.