Will large vacation payout affect my Social Security if I start benefits same month?

Since you mentioned you'll be 66 and 8 months when you retire, you're past your full retirement age (which is 66 and 4 months for people born in 1958). The earnings limit doesn't apply once you've reached your FRA, so your vacation payout won't reduce your benefits regardless of the amount. You can earn as much as you want without any reduction in your Social Security retirement benefits after reaching FRA.

my sister had same thing happen when she retired. big payout from work didnt affect her ss at all. dont worry about it

This is a very important question! The answer depends entirely on whether you've reached your Full Retirement Age (FRA) or not. If you're 66 and 8 months in 2025, you HAVE reached your FRA (which would be 66 and 4 months for someone born in 1958). In that case, you can earn unlimited income without any reduction to your Social Security benefits. However, if you were younger than your FRA, the vacation payout would absolutely count toward the annual earnings limit and could potentially reduce your benefits. For 2025, the estimated earnings limit for people under FRA is around $22,300 annually (it increases every year with inflation). In your specific case, since you're past FRA, you have nothing to worry about! That $8,700 vacation payout won't affect your benefits at all.

There's actually another consideration here that no one has mentioned. Even though the earnings limit doesn't apply once you reach Full Retirement Age, you still need to think about TAXATION of your Social Security benefits. If your combined income (adjusted gross income + nontaxable interest + half of SS benefits) exceeds $25,000 for singles or $32,000 for married filing jointly, up to 85% of your benefits become taxable. That large vacation payout will increase your income for the year and might push you into a situation where more of your SS benefits are subject to income tax. Something to be aware of for your 2025 tax planning.

I had THE WORST experience trying to figure this out when I retired!!! Called SS office like 20 times and got disconnected EVERY SINGLE TIME. No one could tell me how my sick leave payout would affect my benefits. Finally used this service called Claimyr (claimyr.com) and got through to a real person at SSA in under 10 minutes. They have a video showing how it works: https://youtu.be/Z-BRbJw3puU The agent confirmed that since I was past FRA, the payout wouldn't affect my benefit amount. But she also told me what the previous poster mentioned - that it could affect how much of my SS is taxable on my federal return. Totally worth using the service to get a straight answer instead of stressing for weeks!

just wanna add that if ur still working in july even part time and start ss on july 1, the ssa will count u as working the whole month. doeant matter if ur past FRA but if u werent it could matter. my cousin got messed up by this she thought retiring mid month would only count half month earnings but SS counts whole months not days worked

I think everyone here is missing something IMPORTANT!! The SSA looks at when you EARNED the vacation time, not when it gets paid out!! I had a friend who had a similar situation and the SSA considered all that vacation time as being earned during the years he actually accrued it, not when it was paid out. So it didn't count toward his earnings limit at all in his retirement year! You should definitely double-check this with SSA directly though.

Thank you all for the helpful information! I feel much better knowing that since I'm past my FRA, my vacation payout won't reduce my Social Security benefits. I hadn't considered the tax implications, so I'll definitely keep that in mind and probably set aside some money for taxes next year. I'm glad I asked before starting the process - this community has been so helpful!

congrats on retirement!! enjoy it :

Just wanted to add one more thing that might be helpful - make sure to keep good records of that vacation payout for your tax preparer next year! Since it's such a large amount, having documentation showing it was accumulated vacation time (not regular wages) might be useful when filing your taxes. Some tax preparers like to see the breakdown between regular final pay and vacation/sick leave payouts. Congratulations on your retirement - sounds like you've planned this out well!

One more tip that hasn't been mentioned - since you're starting benefits on July 1st and retiring mid-July, make sure to coordinate the timing with your HR department. Sometimes there can be delays in final paycheck processing, and you want to make sure everything is properly documented for both SSA and tax purposes. Also, if your employer offers any flexibility on when that vacation payout is processed (some allow you to split it across tax years), that might help with the tax implications that others mentioned. But given that you're past FRA, the most important thing is that your benefits won't be reduced - you're all set there!

Welcome to retirement! As someone who went through this exact same situation last year, I can confirm what others have said - since you're past your Full Retirement Age, that vacation payout won't affect your Social Security benefits at all. I had about 200 hours of vacation pay when I retired at 67, and it didn't reduce my benefits by a single penny. The key thing to remember is that once you reach FRA, the earnings test completely disappears. You could win the lottery and it wouldn't impact your monthly Social Security payments! Just make sure to plan for the tax implications as others mentioned - that extra income might bump you into a higher tax bracket or make more of your SS benefits taxable. Enjoy your well-earned retirement!

I just want to echo what everyone else has said - you're in great shape! At 66 and 8 months, you're well past your Full Retirement Age, so that vacation payout is completely irrelevant to your Social Security benefits. I work in HR and we see this question come up frequently when people retire. The key thing to remember is that SSA's earnings test only applies to people who haven't reached their FRA yet. Once you're past that milestone (which you are), you can have unlimited earned income without any benefit reduction. The only thing you need to worry about is what others mentioned regarding taxes - that extra $8,700 will be added to your 2025 income, so just be prepared for that when tax season rolls around. Congratulations on your retirement!

I'm new to this community but wanted to share my recent experience since it's so similar to yours! I just went through this exact situation about 6 months ago when I retired at 67. Had a massive vacation payout (almost 300 hours!) and was terrified it would mess up my Social Security benefits. Like everyone else has confirmed, since you're past your Full Retirement Age, you have absolutely nothing to worry about regarding benefit reductions. The SSA doesn't care how much you earn once you've reached FRA - that earnings test is completely off the table for you. The one thing I wish I had prepared better for was the tax impact. That big lump sum pushed me into a higher tax bracket for the year and made a larger portion of my SS benefits taxable. Definitely recommend talking to a tax professional before the end of the year to see if there are any strategies to minimize the impact. But as far as your monthly Social Security payments go, you're golden! Congratulations on reaching this milestone - retirement is wonderful!

This is such great information for anyone approaching retirement! I'm still a few years away from my FRA, but I've been wondering about this exact scenario since I have quite a bit of vacation time saved up too. It's really helpful to see all the different perspectives and real experiences people have shared here. The key takeaway seems to be that once you reach your Full Retirement Age, the earnings test disappears completely - but the tax implications are definitely something to plan for. Thanks to everyone who shared their stories and advice. This community is incredibly valuable for navigating these retirement questions!