Earnings Test Impact on Social Security Benefits for Late-Year Filers

I have a client, Larry, looking to retire this August at age 65 and will earn 50K in 2023.  If he files for his own benefits Dec 2023 age 65.4 and gets his first check in Jan 2024, will he be subject to the earnings test for the Dec amount being that the first check doesn’t come until 2024?

For Larry, who plans to retire in August at age 65 and earn $50K in 2023, the earnings test will still apply when he files for his Social Security benefits in December 2023. Here's how it works:

1. Earnings Test Overview:

   • The Social Security earnings test reduces benefits if earnings exceed the annual limit, which is $21,240 in 2023.
   • Since Larry plans to retire in August and will have earned $50K by the end of the year, his earnings exceed this limit.

2. Monthly Earnings Test:

   • Larry can utilize the monthly earnings test, which allows him to receive his December benefit in January 2024 as long as he earns $1,770 or less in December.
   • By keeping his December earnings under $1,770, Larry can avoid having his December Social Security benefit withheld.

3. First Check in January 2024:

   • If Larry files for benefits in December, his first check will be received in January 2024. The earnings test will consider his December earnings, but using the monthly earnings test can help him receive his full benefit.

Larry should plan to keep his December 2023 earnings at or below $1,770 to avoid the earnings test from reducing his Social Security benefit. By understanding and applying the monthly earnings test, he can ensure that he receives his full December benefit in January 2024 without any reductions.

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