Social Security earnings limit prorated for mid-year retirement? Earned over annual limit before retiring at 65

Yes, there is a special rule for the first year of retirement! In the first year you claim benefits, SSA will use a monthly earnings test rather than the annual limit. For months AFTER you claim (so July-December in your case), you can earn up to $1,860/month ($22,320 ÷ 12) without affecting your benefits. What you earned January-June doesn't matter since you weren't receiving benefits yet. Just be careful to stay under that monthly amount for any work you do for the rest of the year.

This is confusing AF! I thought the rule was just the total for the year no matter when you started. My brother got hit with penalties because no one told him about any monthly rule when he started. The SSA makes everything so complicated on purpose I swear!!!

The others are correct about the first-year rule, but I want to add an important detail: You need to be careful about being truly "retired" from your previous job. If you go back to the same employer, even part-time, SSA might question whether you genuinely retired or just reduced hours. Make sure your employer documents the termination of your full-time position and the creation of a new part-time role. Also, keep all your pay stubs organized by month (not just year) since you'll need to prove your monthly earnings if SSA reviews your case.

just fyi the monthly limit switches back to the annual limit next january. so for 2026 you'll need to stay under whatever the annual limit is for the whole year (probably around $23,000) until you reach your full retirement age. keep that in mind if youre making plans

I went through exactly this situation last year. Trying to call the SSA to confirm this rule was IMPOSSIBLE - waited on hold for 4+ hours multiple times and kept getting disconnected. I finally used a service called Claimyr (claimyr.com) that got me connected to an SSA agent in less than 20 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU. The agent confirmed the monthly limit applies in your first year after retirement, and what you earned before claiming benefits doesn't count against you. Saved me so much stress because I was about to turn down part-time work I actually wanted to do!

just be careful!!! sometimes they say one thing on the phone and then do another thing when they process your earnings. my neighbor got hit with a huge overpayment notice even though she swears she stayed under the limit every month. get EVERYTHING in writing!!!!

One more important tip: for the monthly earnings test, SSA counts income when it's earned, not when it's paid. So if you work in December but don't get paid until January, that still counts for December's monthly limit. This trips up a lot of people, especially with holiday bonuses or delayed paychecks.

To summarize for the original poster: 1) Yes, there's a special first-year rule with monthly limits. 2) For July-December 2025, you can earn up to $1,860/month. 3) Your pre-retirement earnings don't count against you. 4) Document your retirement and new position clearly. 5) Keep detailed monthly income records. 6) Beginning January 2026, you'll be subject to the annual limit again until you reach Full Retirement Age. Does that help clarify things?

Just wanted to add that you should also be aware of state tax implications if you're in a state that taxes Social Security benefits. Some states have their own earnings thresholds that might be different from federal rules. Also, if you're planning to do consulting work, make sure you understand whether you'll be treated as an employee or independent contractor - that can affect how your earnings are reported and when they count toward the monthly limits. The IRS and SSA sometimes have different definitions of when income is "earned" vs "received.

Great thread! I just wanted to add that if you do decide to work part-time, make sure you report your earnings to SSA promptly. You can do this online through your my Social Security account or by calling them. Don't wait until the end of the year - they prefer to adjust your benefits as you go rather than deal with overpayments later. Also, if you're getting health insurance through your part-time work, double-check how that interacts with Medicare eligibility since you're 65. The coordination between employer insurance and Medicare can be tricky and might affect your overall financial picture beyond just the earnings test.

One thing I haven't seen mentioned yet is that if you do end up going over the monthly limit in any given month, SSA typically withholds $1 in benefits for every $2 you earn above the limit (not your entire benefit check). So if you accidentally earn $2,000 in a month instead of $1,860, they'd withhold $70 from your next month's benefit. It's not ideal, but it's not as catastrophic as some people think. Also, any benefits withheld due to the earnings test aren't lost forever - when you reach Full Retirement Age, SSA will recalculate your benefit amount to give you credit for the months when benefits were withheld, which can result in a slightly higher monthly payment going forward.

I'm really glad this thread exists because I'm in a similar situation! I just turned 62 and I'm considering early retirement with Social Security, but I also want to keep some consulting income. Reading through all these responses has been incredibly educational. The first-year monthly rule that @TechNinja mentioned is something I had no idea about - my financial advisor never brought that up! It sounds like the key things are: document everything properly, report earnings promptly through the online portal, and remember that any withheld benefits get credited back at Full Retirement Age. Does anyone know if the monthly earnings test applies the same way if you start benefits before Full Retirement Age but not in your first year of claiming? Like if I claim at 62 and then want to work part-time at 63?