Social Security earnings limit confusion - retiring mid-year at 62 with part-time self-employment

There's something called the 'Monthly Earnings Test' that applies in your first year of claiming. Basically, you only have to worry about the monthly earnings limit (not annual) for the months you're actually receiving benefits. So if you stop working that W2 job in August and apply for benefits starting September, then only your self-employment income from September-December would count toward the limit. For 2025, the monthly limit would be around $1,710 (estimating based on current figures). So as long as your self-employment income stays under that monthly amount after you start collecting, you should be fine.

The previous poster is correct - it's called the Grace Year Monthly Earnings Test. SSA will only count earnings in months AFTER you start receiving benefits in your first year. But be careful with self-employment income - SSA looks at when you perform the work, not when you get paid. So if you do $2,000 worth of work in October but don't invoice until November, it still counts for October's limit. Also, remember that you'll get a reduced benefit amount by claiming before your Full Retirement Age, which is probably around 67 for you. Have you calculated how much your monthly benefit will be reduced by claiming at 62 and 9 months?

wait so does this mean all the money u earn BEFORE u claim SS doesn't count against that yearly limit?? i thought it was a total yearly amount no matter what

I actually just went through this exact situation last year. Make ABSOLUTELY SURE you report your earnings properly and that Social Security understands you've retired from your main job. I didn't do this correctly and ended up with a $4,200 overpayment notice because they counted all my pre-retirement income against the limit! It was a NIGHTMARE to fix. I spent WEEKS trying to reach someone at SSA to explain the situation. Called literally dozens of times and kept getting disconnected or waiting for hours.

Thank you all for the helpful information! I'm going to make sure I document everything clearly for when I apply. I'm still a bit confused about calculating self-employment income though. For W2 work it's clear - just look at the paystub. But for self-employment, do I count my gross income or net profit after expenses? And does it matter if clients pay me late for work done in a particular month?

my sister went thru this last yr and she ended up owing SS money cuz she didn't understand the rules...be SUPER careful!! the monthly limit sounds easy but they add in vacation pay and sick leave payouts too if u get any when u leave ur job!! and dont forget medicare - u need to sign up for that too when u start SS or u get penalties later!!

One other thing to consider - the earnings limit for 2025 will be significantly higher than it is now. For 2024, the annual limit is $22,320 for those below FRA (which translates to $1,860 monthly for the grace year). For 2025, it will likely be around $23,500 based on COLA projections. Also, don't forget that only $1 of benefits is withheld for every $2 you earn above the limit. So even if you do exceed the limit by a bit, you don't lose all your benefits - just a portion.

Strongly recommend you create a my Social Security account at ssa.gov if you haven't already. You can get personalized benefit estimates there. Also, don't forget that the earnings test goes away completely once you reach your Full Retirement Age (around 67 for you). At that point, you can earn unlimited amounts without any reduction in benefits. Some people find it's actually better to wait until closer to FRA if they plan to continue substantial part-time work.

anyone know if IRA distributions count towards the earnings limit? i might retire next year too and was gonna use some of my IRA money