Ask Rusty – Dear Rusty: I retired from working in January of this year and have since claimed Social Security. I didn’t work at all in February or March, but I began a part time job in April. I’m very confused about how Social Security counts earnings for the first year. I don’t know if I need to keep each month’s earnings under $1,770 or if they average it. Some of the literature I’ve found says each month must remain under $1,770 or NO benefit will be paid that month. Two people at the Social Security office told me that they’ll just dock me $1 for every $2 I am over that, even in my first year. I also cannot find anything about when they count your income. Is it when it’s earned or when it’s paid? If I go over in a month because there are three pay periods, can they withhold the benefit for that month? I’m just so confused! Signed: Part Time Worker Dear Part Time Worker: The Social Security earnings test during your first year collecting benefits before full retirement age is, indeed, somewhat confusing. The reason is because there are two methods which Social Security may use during your first calendar year collecting early benefits, and they will use the one which results in the least financial impact to you. To elaborate: If you claim benefits mid-year before your full retirement age, for the remainder of that first year (starting in the month benefits begin and ending in December) you’ll be subject to a monthly earnings limit ($1,770 for 2023). If you exceed the monthly limit in any remaining month of that first calendar year, you won’t be entitled to benefits for that month, so Social Security would (eventually) take back that month’s benefit. That is, unless using the annual limit ($21,240 for 2023) instead will result in a smaller penalty. If your total earnings for your first year collecting are over the annual limit (e.g., $21,240 for 2023), the penalty would be $1 for every $2 over the annual limit and, if that is less than the penalty from using the monthly limit, they will assess the smaller penalty. In other words, Social Security will use the method which is most beneficial to you when assessing a penalty for exceeding the earnings limit during your first calendar year collecting benefits. And just for clarity, the earnings limits are much higher and the penalty less during the year you attain full retirement age (FRA).