Social Security retirement earnings limit confusion at age 65 vs. FRA of 67 - monthly or annual limit?
My wife and I are planning to file for Social Security retirement benefits in March 2025 when we both turn 65. We know our Full Retirement Age is 67, so we'll be filing early. I'm really confused about the earnings test though. I plan to keep working part-time at my accounting firm through April, and my wife might pick up some consulting work later in the year. Does the earnings limit work differently for the months before we start collecting? Is there a monthly limit for January and February, or does the whole annual limit ($22,320 for 2025?) apply even though we're only getting benefits for 10 months? And if we go over, do they take back $1 for every $2 over? I've read conflicting information and the SSA representative I spoke with seemed rushed and didn't explain it clearly. Any help would be appreciated!
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Dylan Baskin
You're asking about what's called the Grace Year provision. Here's how it works: In your first year of retirement (2025), SSA will apply a monthly earnings test rather than the annual test, but ONLY if this is your first year of retirement. The monthly limit for 2025 is $1,860 (which is $22,320 ÷ 12). In any month you earn over $1,860 BEFORE you start receiving benefits, you won't be considered retired for that month. But once you start receiving benefits in March, any month you earn over the monthly limit, you'll lose benefits for that specific month. After your first year of retirement (so in 2026), only the annual limit applies. And yes, SSA withholds $1 in benefits for every $2 you earn above the limit.
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Hunter Brighton
•Thank you! So if I understand correctly, for January and February 2025, they'll check if I earned over $1,860 each month, but since I won't be receiving benefits yet, it doesn't matter? Then starting in March when benefits begin, they'll check each month until December 2025, and if I go over in any month, I lose benefits just for that month? Then in 2026, they switch to the annual limit?
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Lauren Wood
me and my husband had this EXACT same issue last year!!! we started SS at 63 (big mistake lol) and i kept working at walmart. nobody told us about the limit and we had to pay back like $4000!!! make sure u calculate EVERYTHING before u file. the SS office doesnt warn u at ALL!!!
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Hunter Brighton
•Oh no, that's exactly what I'm afraid of! Did they take it all at once or let you pay it back over time? We're trying to budget carefully but it's so confusing.
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Ellie Lopez
my sister said the earnings limit is different depending on if ur under or over FRA. i think if ur under FRA its like $22k but if ur in the year u reach FRA its higher like $50k or something. maybe check that part too
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Dylan Baskin
•You're right that there are two different earnings limits. For 2025: - If you're under your FRA all year: $22,320 annual limit ($1,860 monthly) - In the year you reach FRA: $59,520 annual limit ($4,960 monthly), and only earnings before the month you reach FRA count But since OP and spouse are turning 65 in 2025 and their FRA is 67, they won't reach FRA until 2027, so the lower limit applies to them for both 2025 and 2026.
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Chad Winthrope
The earnings limit can be really tricky - I had to call SSA six times to get clear answers when I retired. Spent hours on hold each time! I eventually used a service called Claimyr (claimyr.com) to get through to an agent in under 5 minutes instead of waiting for hours. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU But to answer your actual question - the first year retirement rule (monthly limit) is super helpful. It means you could earn $100,000 in January, but if you stay under $1,860 for March-December after you start benefits, you won't lose any benefits. The monthly test only applies in your first year though.
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Paige Cantoni
•Is that service legit? I've been trying to get through to SS for weeks about my disability application. I'll try anything at this point.
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Chad Winthrope
•Yes, it's legitimate. I was skeptical too, but after my fifth failed attempt to get through to SSA, I gave it a try. It works by keeping your place in line for you. Saved me hours of frustration, especially when dealing with the earnings test questions.
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Kylo Ren
Watch out for the tax implications too! Your Social Security might be taxable if your combined income (adjusted gross income + nontaxable interest + half of SS benefits) exceeds the threshold, which is only $32,000 for married filing jointly. With both of you working part of the year plus collecting SS, you might face a surprise tax bill.
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Hunter Brighton
•That's a good point. I hadn't even considered the tax side of this. So we need to track both the earnings limit for benefit reductions AND the combined income for tax purposes. This retirement planning is much more complicated than I expected!
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Nina Fitzgerald
i retired at 62 last year and they didnt apply any monthly test to me, just took money back for the whole year i think the rules changed recently so double check everything
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Dylan Baskin
•The monthly earnings test isn't automatic - you have to be in your first year of retirement AND stay under the monthly limit in some months after you start benefits. If you earned over the monthly limit in every month, then yes, they would just apply the annual test. The rules haven't changed recently on this specific provision though.
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Lauren Wood
The worst part of this whole system is that they don't explain ANYTHING clearly when you apply!! They just have you sign papers and then surprise you later with all these complicated rules. I spent 3 days trying to reach someone at SS when I got my overpayment notice.
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Hunter Brighton
•That's what worries me. The person I spoke with barely explained anything and seemed annoyed that I was asking questions. Did you eventually get clear answers when you reached someone?
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Lauren Wood
•i got 3 different answers from 3 different people!!! finally got someone helpful on the 4th try who explained everything. keep calling until u get someone who knows what theyre talking about!
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Dylan Baskin
One other important point: When they say you'll lose benefits if you earn too much, they don't actually take away your benefit forever. Once you reach your Full Retirement Age (67 in your case), SSA will recalculate your benefit amount to give you credit for the months when benefits were withheld. So you'll get a small increase in your monthly benefit starting at age 67 to make up for some of what was withheld.
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Hunter Brighton
•That's really good to know! So it's more like a deferral than a permanent loss. Does that recalculation happen automatically, or do we need to contact them when we reach 67?
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Dylan Baskin
•It should happen automatically, but it's always a good idea to check your benefit amount after you reach FRA to make sure the adjustment was made. If you don't see an increase within 2-3 months after reaching 67, then contact SSA to inquire about it.
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Ellie Lopez
My brother had to deal with this last year and said the monthly thing only works if you make under the limit for the REST of that same year. If you go over the monthly limit even once after starting benefits, they switch you to the annual test for the whole year.
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Hunter Brighton
•Oh, that's concerning. So if I stay under in March-June but go over in July, they might go back and apply the annual test to the whole year? That would make planning much harder.
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Dylan Baskin
•That's not quite right. If you exceed the monthly limit in some months but not others, you'll only lose benefits for the specific months you exceed the limit during your first year of retirement. You won't automatically switch to the annual test for the whole year. Your brother might have had a different situation or received incorrect information.
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Kylo Ren
Don't forget to track your earnings carefully throughout the year. SSA won't necessarily warn you when you're approaching the limit - they often just discover it when earnings are reported and then send you an overpayment notice later. I recommend creating a spreadsheet to monitor your monthly income against the limit, especially since you'll both have variable income from part-time and consulting work.
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Hunter Brighton
•That's excellent advice. I'll definitely set up a tracking system. Do you know if they count gross earnings or net after business expenses for my wife's consulting work?
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Kylo Ren
•For self-employment income (your wife's consulting work), SSA counts net earnings from self-employment - that's her gross income minus allowable business expenses and the employer-equivalent portion of self-employment tax. For your W-2 income, they count gross wages before any deductions.
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