Social Security earnings limit confusion - will my checks be withheld or do I pay back later?
I'm retiring in December but will start receiving Social Security retirement benefits in January 2025 (I'll be 64). I know I'll be subject to the earnings limit since I'm below my FRA, but I'm confused about how the withholding works. I estimated on my application that I'll earn about $25,000 next year (some from part-time work at my old company and some from independent consulting). I just received a letter saying my first check will be withheld because of my projected earnings. What I don't understand is what happens if I end up making MORE than the $25K I estimated. Will they just withhold additional monthly payments? Bill me at year-end? I'm trying to budget for next year and need to understand if certain months I'll get no payment at all or if they'll ask for money back after I file taxes. The earnings test is so confusing! Anyone dealt with this before?
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Lincoln Ramiro
The withholding is done based on your estimate, and they withhold entire checks rather than partial amounts. Since you're not at Full Retirement Age yet, they'll withhold $1 for every $2 you earn above the 2025 limit (probably around $22,560 based on this year's COLA trends). So if you estimated $25,000, that's about $2,440 over the limit, meaning they'll withhold roughly $1,220 in benefits - which is likely why they're holding back your first check. If you end up earning more than your estimate, one of two things will happen: either you can proactively report the higher income and they'll withhold more checks, or they'll discover it when your tax returns are processed and send you a notice of overpayment that you'll need to repay. It's usually better to update your estimate if you realize you'll earn significantly more.
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Henrietta Beasley
•Thank you for explaining! So they take whole monthly checks rather than partial amounts - that helps me understand. Do you know how quickly they process income changes if I report them? For example, if in March I realize I'm going to earn $30K instead of $25K, how soon would they adjust by withholding additional checks?
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Faith Kingston
They ABSOLUTELY will come after you if you make more than you reported!!! I was in your exact situation last year and underestimated my earnings by about $5000. I got a lovely surprise 8 months after filing my taxes - a notice saying I owed back $2500 in benefits!!! They gave me 30 days to pay it all back or set up a payment plan. The whole system is ridiculous. Why can't they just adjust as you go like normal tax withholding?? The earnings limit is a TRAP for people trying to transition to retirement.
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Emma Johnson
•same happened to my dad he had to pay back almost $3k because his part time job gave him more hours than he expected. these rules r so complicated
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Liam Brown
I went through this last year. Here's what happens in practice: SSA will withhold full months of benefits based on your estimate. For the 2025 limit (which will be around $22,560) and your $25,000 estimate, you're about $2,440 over the limit. At the $1 for $2 rate, that's $1,220 in benefits they'll withhold - which is probably one monthly payment for you. If you earn more than estimated, you have two options: 1) Report the change to SSA mid-year, and they'll adjust by withholding more monthly benefits 2) Do nothing, and after tax season when SSA gets your actual earnings from IRS, they'll send an overpayment notice My recommendation: Keep track of your earnings carefully. If you see you're going to substantially exceed your estimate, call SSA and update it. Much easier than dealing with an overpayment. And remember, once you reach your Full Retirement Age, the earnings test goes away completely!
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Olivia Garcia
•i think it's crazy they don't tell people this stuff clearly!! my sister had no idea and got hit with a huge bill. had to pay back months of benefits because her earnings were like $8k over what she thought they'd be.
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Noah Lee
Just wondering, why are you taking SS before your full retirement age if you're still working and making that much? Wouldn't it make more sense to wait until FRA so you don't have to deal with the earnings limit at all? Or at least wait until you're actually fully retired?
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Henrietta Beasley
•Fair question! I have some health concerns that make me uncertain about longevity. I've run the calculations and even with the earnings test reduction, starting early makes sense in my situation. Plus, I'm really only planning to work part-time for another year or two, then fully retire. The $25K is significantly less than I was making before.
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Ava Hernandez
Hey there! Had almost this exact situation last year. The way it works is actually pretty confusing but I got through it. They do the withholding based on your ESTIMATE first - taking whole checks, not partial ones. Then when the actual numbers come in after tax time, they reconcile. BTW, trying to reach SSA to update your estimate when things change is a NIGHTMARE. I spent 3 weeks trying to get through on their 800 number. Finally I found this service called Claimyr (claimyr.com) that got me through to a real person at SSA in under 5 minutes. They have a video showing how it works here: https://youtu.be/Z-BRbJw3puU Saved me hours of frustration when I needed to update my earnings projection mid-year. Much better than getting hit with an overpayment notice later!
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Noah Lee
•Does that service actually work? I've been trying to get through to SSA for days about my husband's application status.
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Ava Hernandez
•Yes, it worked perfectly for me! Got through in minutes instead of hours or days of trying. When I finally talked to the SSA rep, she told me they're chronically understaffed and the hold times are just getting worse. The service basically keeps dialing for you and gets you in the queue.
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Henrietta Beasley
I just called my local office to try to get clarification and of course got nowhere. The person I spoke with just kept repeating that they withhold based on the estimate and that I should report any changes. Couldn't get a clear answer on the timing or process for adjustments if my income changes. So frustrating!
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Liam Brown
•That's unfortunately typical. Here's what you should know about timing: if you report a change in expected earnings, it usually takes 1-2 months for them to process and adjust your withholding. The adjustment isn't retroactive - they just change the future months' withholding. That's why it's best to report changes as soon as you know about them rather than waiting.
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Olivia Garcia
the whole earning limit thing is a scam tbh. its our money we paid in all those years!!! why do they get to decide when we can have it back. my brother waited til 70 and then died 6 months later. all that money he never got to use!!
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Lincoln Ramiro
•While I understand the frustration, it's important to note that the earnings limit only applies before Full Retirement Age. The system was designed this way because Social Security is meant to replace lost income from retirement. Remember that benefits are increased permanently by 8% per year for each year you delay from FRA to 70, which is why some people choose to wait. I'm sorry about your brother - that's certainly a difficult situation.
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Emma Johnson
r u sure ur getting the right info? my aunt started ss last year at 63 and they told her the first $1800 per month she made wouldnt count against the limit. have u asked about the monthly rule??
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Liam Brown
•You're referring to the monthly earnings test, which only applies in the first year of retirement. If the person is truly retiring (not just reducing hours), SSA will only count earnings in months after retirement during that first calendar year. However, in the following years, they use the annual earnings test. Since OP is retiring in December but starting benefits in January, they'll be subject to the annual test, not the monthly one.
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Faith Kingston
I still think the whole system is designed to confuse people and take their money. They make the rules so complicated that normal people can't possibly understand them. Then when you mess up, they hit you with overpayment notices and demand the money back right away. Meanwhile, they keep telling us Social Security is running out of money. Of course it is when they're paying all these bureaucrats to find ways to deny us our benefits!!!
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Lincoln Ramiro
•While the rules can certainly be complex, they're actually designed to balance different objectives - providing retirement security while encouraging longer work lives to strengthen the system's finances. The earnings test is actually benefit deferral, not benefit denial - after you reach FRA, your monthly benefit is permanently increased to account for months when benefits were withheld. But I agree the SSA could do a much better job explaining these complicated rules to beneficiaries.
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