Will severance package count against Social Security earnings limit after taking SS at 62?

The treatment of severance pay depends on how it's classified. In most cases, severance is considered "wages" for Social Security purposes in the year you receive it, not when you earned it. So if you get $45K in severance after starting benefits in May 2025, it would likely count against your earnings limit. However, there can be exceptions. Some types of payments might be attributable to the year the work was performed rather than when paid. You should definitely call SSA directly to discuss your specific situation before making your filing decision. You might be able to negotiate with your employer about the timing of the severance payment if possible - receiving it in 2024 before you start benefits would avoid the earnings test issue entirely.

I went thru something similar when i took early SS. my severence was counted in the year i got it and it KILLED my benefits that year!! they took back almost half my SS payments for those months. its becuz the earnings limit is so low until u hit full retirement age. Wish id known that before filing!!!!

I want to clarify something important here. How your severance affects the earnings test depends on what type of severance it is: 1. Standard severance pay is typically counted as wages in the year received 2. However, if your severance can be classified as "special payments" (payments for work done in previous years), it might not count toward the earnings test You should request Form SSA-131 (Employer Report of Special Wage Payments) from your employer. If they complete this form properly, your severance might be excluded from the 2025 earnings test. You can find more info about this in SSA's Program Operations Manual System (POMS) section RS 02505.001.

Have u tried calling the SSA about this????? I spent FOUR DAYS trying to get through to them last month and kept getting disconnected or put on hold for hours!!! So frustrating when u just need a simple answer to plan your retirement!!! The system is BROKEN!!

my neighbor had somethin similar happen and he just spent the money real quick before SSA found out lol

Can I ask why you're taking SS at 62? Just curious because I'm trying to decide when to start mine. I'm leaning toward waiting until FRA (67 for me) but sometimes I think I should just take it early like you're doing.

Another option to consider: if the timing works out, you could potentially delay your SS application until January 2026 (assuming your finances allow it). That way, your 2025 earnings including severance won't matter for the earnings test, and you'd only lose 8 months of benefits compared to your original plan. The earnings limit is applied on an annual basis, so if you have high earnings in one year, it can make sense to wait until the following year to start benefits. Just something to consider as you weigh your options.

One more thing to consider - if you do end up having benefits withheld due to the earnings test, it's not necessarily money lost forever. Once you reach full retirement age, Social Security will recalculate your benefit amount to give you credit for the months when benefits were withheld due to excess earnings. So while it's still better to avoid the earnings test if possible, just know that those "lost" benefits aren't completely gone - they get factored back in later when you reach FRA. That said, I'd still recommend pursuing the Form SSA-131 route that Gael mentioned or trying to get the severance paid in 2024 if your employer is flexible on timing.

I'm in a similar situation - took early retirement at 62 last year and had to navigate the earnings test. One thing that really helped me was keeping detailed records of all communications with my employer about the severance classification. When I called SSA, they asked for specific documentation about when the work was performed versus when payment was made. Also, don't forget that if you do end up over the earnings limit, there's a monthly test for the first year of benefits. So if your severance comes in later months of 2025, you might only lose benefits for those specific months rather than having it spread across the whole year. The SSA agent I spoke with explained that the monthly test can sometimes be more favorable than the annual test depending on timing. Good luck with your employer negotiations - having them complete Form SSA-131 could really save you a lot of headaches!

I went through something very similar when I started my SS benefits at 62 three years ago. My employer was actually pretty accommodating when I explained the situation - they were able to structure my severance as deferred compensation for work performed in previous years and completed Form SSA-131. It made all the difference! A few practical tips from my experience: 1) Get everything in writing from your employer about how they're classifying the payment, 2) If they can't do the special payment classification, ask if they can split the severance across tax years (part in 2024, part in 2025), and 3) Keep copies of your employment contract and any severance agreement language. The key thing that helped in my case was showing SSA that the severance was based on my 18-year tenure rather than current-year work performance. Since you mentioned 18 years of service, you might have a good case for the special payment classification. Don't give up hope - there are definitely options to explore before you have to deal with benefit reductions!

I'm currently 61 and considering filing for SS at 62 next year, so this thread has been incredibly educational for me! I had no idea about Form SSA-131 or the special payment classification - thank you to everyone who shared that information. One question I have: for those who successfully got their severance classified as a special payment, how long did the process take? I'm wondering if there's a time crunch involved since you're planning to start benefits in May. Also, did any of you have to get legal help with the employment agreement language, or were your HR departments able to handle it on their own? The monthly vs annual earnings test distinction is also really valuable to know. It sounds like timing could make a huge difference in how this all plays out for you, Harold. Really hoping your employer is willing to work with you on this!

I'm dealing with a very similar situation right now! I was laid off in November and I'm 61, planning to file for SS benefits in a few months. My severance is also going to be substantial - around $38K - so I've been researching this extensively. One thing I learned that might help: if your employer hasn't finalized the severance agreement yet, you might have more negotiating power than you think. I was able to get my company to agree to pay half my severance in December 2024 and half in January 2026 (after I turn 62 but before I plan to file). This way I avoid the 2025 earnings test entirely. Also, check if your company has any flexibility on HOW they pay the severance. Some companies can structure it as continued salary payments over several months rather than a lump sum, which might give you more control over the timing and amount that hits in any given tax year. The Form SSA-131 route that others mentioned is definitely worth pursuing, but having a backup plan with payment timing could save you a lot of headaches. Good luck with your negotiations!

This is such a comprehensive discussion - I'm learning so much from everyone's experiences! I'm 60 and considering my SS filing strategy, so this thread is incredibly timely for me. One additional consideration I haven't seen mentioned yet: if you do end up with the severance counting toward your 2025 earnings and benefits get withheld, make sure to keep track of exactly how much gets withheld. When SSA recalculates your benefits at FRA (as Anna mentioned), having your own records can help ensure they credit you correctly for all the withheld amounts. Also, I wanted to add that some companies have Employee Assistance Programs (EAP) that include retirement planning consultations. If your company offers this, the consultant might be able to help you navigate the severance classification conversation with HR from a benefits perspective. They often have experience with these types of situations and can frame the request in terms that HR understands. Harold, it sounds like you have several good options to explore. Between the Form SSA-131 route, potential payment timing negotiations, and the monthly earnings test for your first year of benefits, you're not necessarily stuck with a bad outcome. Keep us posted on how your conversations with HR go!

I'm a retirement benefits specialist who has helped many clients navigate this exact situation. The good news is that you have several viable options to explore, and it's not too late to potentially avoid the earnings test issue entirely. First priority: Contact your HR department IMMEDIATELY about Form SSA-131. Since your severance is based on 18 years of service rather than current work, you have a strong case for special payment classification. The key is getting HR to understand that this form protects both you and the company - it's not additional work for them, it's proper classification that benefits everyone. If Form SSA-131 doesn't work out, here are your backup options: 1. Request payment timing modifications (split between 2024/2026 or structured payments) 2. Use the monthly earnings test for your first benefit year (much more favorable if severance comes later in 2025) 3. Consider delaying your SS filing to January 2026 if financially feasible The monthly test is crucial to understand: in your first year of benefits, if you earn over the monthly limit ($1,860 in 2025), you lose benefits only for that specific month, not the entire year. This could significantly reduce any benefit loss. Document everything in writing with your employer. Even if they can't accommodate all requests, having the paper trail helps with SSA later. You're in a much better position than you think - don't panic, just act quickly on these conversations with HR.