Taking SS benefits before FRA while working over earnings limit - will they just withhold payments later?
I'm helping my mom figure out a Social Security puzzle and hoping someone can clarify how the earnings limit penalties actually work. She's reaching her Full Retirement Age (FRA) in about 18 months but is in a tough financial spot right now. We're considering having her claim SS early to help with immediate expenses, but she needs to continue working and would definitely earn over the annual earnings limit ($21,240 for 2025). Here's what I'm trying to understand: 1. If she claims early but exceeds the earnings limit, does SSA just withhold some monthly payments the following year to recover the "overpayment"? 2. During months they withhold payments due to excess earnings, does that actually slightly increase her permanent benefit amount when she reaches FRA (since those months wouldn't count as early reduction months)? 3. I understand taking benefits before FRA creates a permanent reduction, but I'm wondering if this withholding situation might actually offset a tiny bit of that reduction. Basically, we're trying to determine if starting benefits early while still working above the limit could actually be strategic in her situation rather than just waiting until FRA. Would appreciate any insights from those who've navigated this specific situation!
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Yuki Kobayashi
Yes, if your mom claims early and exceeds the earnings limit, SSA will withhold future payments rather than asking for money back. For 2025, they withhold $1 in benefits for every $2 earned above the limit. So if she exceeds the limit by $5,000, they would withhold $2,500 in benefits, typically by suspending monthly payments until that amount is recovered. And you're correct about the second point - this is called the "adjustment of the reduction factor" (ARF). Months where benefits are completely withheld due to earnings don't count in the early retirement reduction calculation. When she reaches FRA, SSA will recalculate and give her credit for those months, which will increase her monthly benefit slightly. Whether this strategy makes sense depends on her specific situation, but you've identified the key mechanics correctly.
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AstroAce
•Thank you so much for explaining! That ARF thing is exactly what I was trying to understand. Do you happen to know if there's any way to estimate how much her benefit might increase from those withheld months? And does SSA automatically recalculate this at FRA or would she need to contact them?
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Carmen Vega
My brother did this exact thing last year!!! He started SS at 63 but was still working good money as a consultant. SSA held back like 4 payments this year but he said it was still worth it bcuz he needed the cash flow for the months they did pay him. He told me they don't make u pay anything back they just skip some checks. But u should really call SSA direct to check your moms exact #s
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Andre Rousseau
•Good luck with calling SSA! I tried calling for WEEKS about my husband's benefits and could never get through. Always disconnected or 3+ hour wait times. So frustrating!
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Zoe Stavros
•I had the same issues trying to reach SSA by phone until I found this service called Claimyr that got me through to an agent in under 20 minutes. It basically calls SSA for you and then connects you when they answer. Saved me hours of frustration when I was dealing with my mom's survivor benefits. You can see how it works at https://youtu.be/Z-BRbJw3puU or their website claimyr.com. Definitely worth it for complicated questions like this where you need to speak with an actual agent.
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Jamal Harris
I disagree with the advice you're getting. Your mother should NOT claim early if she's going to keep working above the earnings limit! The permanent reduction for claiming 18 months early is about 10% of her benefit FOREVER. That's thousands of dollars over her lifetime! The adjustment at FRA for withheld months helps a tiny bit but doesn't come close to making up for the early filing reduction. A better strategy would be for her to find other ways to meet expenses for 18 months, then claim her FULL benefit at FRA and keep working with NO earnings limit.
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AstroAce
•I appreciate your perspective. The permanent reduction is definitely a major concern. Unfortunately, she doesn't have many other options right now - her savings are nearly depleted and she can't qualify for enough loan amount to bridge the gap. The early benefits would mean the difference between keeping her house and not, even with some withheld months.
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Jamal Harris
•I understand tough situations, but you should at least run the numbers before deciding. If she lives to average life expectancy (85+), she could lose over $40,000 in lifetime benefits by claiming early. Has she looked into: - A HELOC if she has home equity - Temporary part-time second job - Family loan - Downsizing now rather than later Just trying to prevent a permanent solution to a temporary problem.
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Andre Rousseau
A lot of people don't know this but sometimes the SSA makes mistakes with the ARF recalculation!!! My husband had 7 months of benefits withheld when he was 63 because of work but when he hit FRA they DIDN'T adjust his benefit up like they were supposed to!! We had to go to the office with all his paperwork and PROVE which months were withheld. Make sure ur mom keeps all her paperwork!!!
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Yuki Kobayashi
•This is excellent advice. I always recommend keeping copies of all SSA correspondence, annual earnings statements, and especially any notices about benefit withholding. It's wise to create a dedicated file for these documents and check your benefit amount at FRA to ensure proper ARF calculations were applied.
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GalaxyGlider
Hi - one important point I haven't seen mentioned yet: The earnings limit is much higher in the year your mom reaches FRA. For 2025, in the months before reaching FRA during her FRA year, she can earn up to $56,520 (estimated based on 2024 figures), and they only withhold $1 for every $3 over the limit, not $1 for $2. So potentially, if most of her earnings would happen during that partial FRA year, she might face much less withholding than you're calculating.
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AstroAce
•That's a HUGE detail I didn't know about! So in her case, if she claims benefits 18 months early but most of her higher earnings fall in the year she reaches FRA, she'd be subject to a much higher limit and a more favorable withholding rate? That could significantly change our calculations. Thank you!
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Mei Wong
just want to make sure you realize theres 2 different things - the SSI program and the retirment benefits program. SSI has strict income limits and resources limits but retirement doesn't have resources limits just the earnings test. sounds like your talking about retirement but just making sure
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AstroAce
•Yes, we're definitely talking about retirement benefits (RSDI), not SSI. Thanks for checking though - that's an important distinction!
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Jamal Harris
Also consider how this impacts her taxes! If she works AND collects SS, up to 85% of her SS benefits could become taxable depending on her combined income. This is something people often overlook when making this decision.
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Carmen Vega
my cousin had to pay back a big amount because she didnt report her earnings right. make sure ur mom keeps ssa updated on her income so she doesnt get a surprise bill!
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Yuki Kobayashi
•This is a good point. The earnings test is typically applied based on your estimated earnings for the year. If you earn more than estimated, SSA can assess an overpayment. However, they usually recover this through withholding future checks rather than requesting immediate repayment. Your mother should update SSA promptly if her earnings will be different than initially reported.
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AstroAce
Thank you all for the incredibly helpful advice! Here's my takeaway plan for my mom: 1. She'll request a detailed benefit estimate from SSA showing exact figures at different claiming ages 2. We'll calculate how many months might be withheld based on her expected earnings 3. We'll factor in the higher earnings limit for her FRA year 4. I'll help her create a system to track and report all earnings accurately 5. We'll weigh the permanent reduction against her immediate financial needs One last question - does anyone know if she would receive a notice from SSA before they withhold payments, or would they just stop coming?
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GalaxyGlider
•Yes, SSA will send a notice before withholding payments. It will explain which months will be withheld and why. They typically do this annual adjustment early in the year after they receive earnings information. Another option you might consider: if your mom's situation improves before FRA, she could potentially withdraw her application within 12 months of filing (paying back benefits received) or suspend benefits at FRA to earn delayed retirement credits. These provide additional flexibility.
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