'I Thought I Could Still Work A Little': Retiree Hit With Surprise $9,648 Social Security Overpayment Notice

When one retiree left his job in last August and applied for Social Security at age 63 and 5 months, he thought he was doing everything by the book. In a post on Reddit, he shared that his first check came in September — but just a few months later, he was shocked to receive a letter stating he owed the Social Security Administration $9,648 due to overpayment.

The issue? His earnings for the year had already exceeded the annual limit for Social Security recipients under full retirement age.

Here's what went wrong — and what other soon-to-be retirees can learn from it.

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The Earnings Limit Before Full Retirement Age

If you begin collecting Social Security before reaching full retirement age, there are limits on how much you can earn from working without seeing your benefits reduced.

In 2024, the annual earnings limit was $22,320. If you earn more than that, the SSA withholds $1 for every $2 you earn above the limit.

The retiree in this case had earned about $48,500 before quitting his job in early August. That was well over the annual limit, which automatically triggered a full clawback of his 2024 benefits. Since his first four checks added up to $9,648, that entire amount was marked for recovery.

The One-Time Rule That Could Help

Many retirees don't realize there's a special rule for those who retire mid-year. This rule allows you to use a monthly earnings limit in your first year of retirement, instead of the full-year limit.

In 2024, the monthly limit was $1,860. That means if you earned less than $1,860 in a given month, you could still receive your full Social Security payment for that month — even if your total earnings for the year were above the annual limit.

In this retiree's case, he earned only $900 from August through December — well under the monthly threshold. Under the special rule, he may still qualify to keep the benefits he received in those months.

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What to Do If This Happens to You

If you receive an overpayment notice and believe you qualify under the monthly earnings test, the SSA does allow certain months to be excluded from the annual earnings test. According to SSA guidelines, these are months where your earnings were below the monthly threshold and you were considered retired.

To correct the record, the SSA recommends contacting them directly to report your earnings. You can do this:

• By phone or online, to inform them of months when your earnings were below the monthly limit.
• By requesting a waiver if repaying the full amount would cause financial hardship and you believe the overpayment wasn't your fault. This involves submitting Form SSA-632-BK.

One user on the Reddit post also suggested submitting a signed statement that includes their total earnings and identifies the specific months they believe should be counted as "non-work" months. 

Keep in mind that different rules may apply if you were self-employed. The SSA generally considers more than 45 hours of work per month as substantial, even if your income was low — which could disqualify those months from being counted as "retired."

The Bottom Line

Social Security rules can be confusing — especially when it comes to working while collecting benefits. If you're planning to retire mid-year, it's important to understand the special earnings limit rule and how to report your income correctly.

By planning ahead and notifying the SSA about your work and earnings, you may be able to avoid unexpected overpayment notices — and keep more of your benefits in your pocket.

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