Social Security earnings limit question - monthly vs yearly counting when starting mid-2025

The earnings limit for 2025 is expected to be around $22,320 for the year if you're under full retirement age (which you are at 64/65). The way it works is that SSA withholds $1 in benefits for every $2 you earn above that annual limit. If you start benefits mid-year, there's a special rule called the "first year rule" where they look at your monthly earnings rather than the yearly total. So if you start benefits in July, they'll only count earnings from July-December against you, and they'll apply a monthly limit (annual limit divided by 12). Each month you earn under that monthly limit, you get your full benefit regardless of annual earnings. Starting mid-year might be smarter financially if you'll be over the annual limit. You can find all this info on the SSA website under "working while receiving benefits".

I went thru this last yr with my wife - its confusing!! The SSA does a MONTHLY test in the first year you claim benefits, not yearly. So if you start benefits in July, they only look at your earnings from July-Dec. But here's the catch - they look at each month separately! So if you earn over the monthly limit (around $1860) in July, you get NO benefit for July. But if you take a month off or reduce hours in August and earn UNDER the monthly limit, you GET your full benefit for August. It's month by month! This is ONLY for the first calendar year you claim. Lots of people dont know this and it can make a big difference in your strategy!!

Important to note - in the calendar year you reach full retirement age (which isn't your case yet), the earnings limit is much higher (around $59,520 for 2025) and they only withhold $1 for every $3 above the limit. Plus they only count earnings BEFORE the month you reach FRA. For your specific situation, starting in July would definitely be better. With the monthly rule, you could even consider working full-time Jan-June, then reducing to part-time Jul-Dec to stay under the monthly limit for those months. That way you'd get your full SS payment for each month you earn under the monthly limit. After your first year on benefits, they'll switch to the annual test. So for 2026, they'll look at your entire year's earnings.

I just went through this exact situation last year!!! The monthly thing is called the "grace year rule" and its SUPER important. Each month you make less than the monthly limit, you GET YOUR FULL BENEFIT regardless of yearly total!!! But if u make even $1 over the monthly limit, you LOSE THE WHOLE BENEFIT for that month!!! The monthly limit is the yearly limit divided by 12. So for you it would be around $1,860 per month. If you make $4,000 a month working full time, you would lose your entire benefit for every month you work full time. PS this only applies to the first year you get benefits. After that it's annual.

Getting thru to SSA to ask these questions is almost impossible these days. I spent 3 weeks trying to get a straight answer about my earnings test questions and kept getting disconnected or told to call back. I finally used a service called Claimyr that got me through to a live agent in under 20 minutes. They have a demo video at https://youtu.be/Z-BRbJw3puU and it worked exactly like they showed. The agent I spoke with explained all the monthly earnings test details for my situation and cleared up my confusion. Their website is claimyr.com - definitely worth it rather than spending weeks trying to get through on your own.

Let me clarify something important: even if benefits are withheld due to the earnings test, you'll get that money back later. Once you reach full retirement age (66+10mo for someone born in 1959), SSA recalculates your benefit and gives you credit for the months when benefits were withheld. So your monthly benefit permanently increases after FRA to make up for what was withheld. The earnings test isn't a tax or penalty - it's more like a deferral of benefits. This is a key point that many people don't understand.

ALSO be careful about state taxes!!!! Social security is taxed differently in every state. Some states tax SS benefits and some don't! And federal taxes can take up to 85% of your benefits depending on your combined income!!! Make sure u factor this in when deciding when to claim!!!

One more thing to consider - will you still be 64 for all of 2025 or will you reach FRA during the year? The month you reach full retirement age, the earnings test goes away completely. So if you'll reach FRA in 2025, that changes the calculation quite a bit.

Based on everything in this thread, it seems like your best strategy would be: 1. Work full-time January-June 2025 2. Start benefits in July 2025 3. Reduce your work hours to stay under the monthly limit ($1,860) for July-December 4. For 2026, decide whether to continue working reduced hours or stop working entirely based on the annual limit This maximizes your total income from both work and Social Security. Plus, any benefits withheld will eventually be returned to you as increased monthly payments after you reach full retirement age in 2027.