He Takes a New Job at 64 With a $100,000 Stock Grant. When the Shares Vest, Social Security Could Withhold His Retirement Checks Even Though He Hasn’t Sold a Single Share
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Picture a 64-year-old who already receives about $2,000 a month from Social Security. Then he gets a job offer: a $40,000 salary plus $100,000 in restricted stock units (RSUs). These are shares the company promises to hand over in pieces as long as he stays. He figures stock he hasn’t sold can’t touch his checks. He’s wrong about that.
Grants like this are common. On November 6, Vera Therapeutics (NASDAQ:VERA) announced incentive grants to new hires. They included RSUs that vest over four years, with 25% of the underlying shares vesting on each anniversary of November 20, 2026. Our worker is a composite and isn’t one of those hires, but his grant works in the same way.
He’d have company. One early retiree told a Social Security advice column she “had no idea that Restricted Stock Units… would be included in my W2 as total wages.” She then faced an overpayment of $4,163.
Shares You Never Sold Still Count as Pay
RSUs earned through ongoing work generally become compensation when they vest and the shares are delivered. They’re valued at that day’s share price, whether he sells or holds. Federal tax law counts property received for services as income once it’s no longer subject to a substantial risk of forfeiture. Stock options work differently. With options, income usually shows up when you exercise the option or later, so the date the options vest doesn’t trigger it.
Social Security’s earnings test generally counts wages from current work. So the stock reported as wages on his W-2 will generally count toward Social Security’s earnings test if it compensates him for work performed while collecting benefits.
A $100,000 grant can turn into taxable earnings gradually as shares vest over several years. On a four-year schedule, about a quarter vests each year. The dollar amount depends on the share price on vesting day, so the grant-date value can be off in either direction.
How $25,000 of Stock Could Freeze 10 Checks
Say one $25,000 portion vests in 2027 on top of his $40,000 salary. If the full $65,000 counts toward that year’s earnings test, the math is simple enough to do on a napkin:
- The 2027 limit for anyone under full retirement age all year is $25,560.
- His $65,000 goes over that limit by $39,440.
- Social Security deducts $1 in benefits for every $2 above the limit, which comes to $19,720.
His benefits add up to $24,000 a year. Social Security generally withholds whole monthly checks, so about 10 of his 12 payments could stop. Withholding can never be more than the benefits he’s owed, but in this case it takes most of them.
His salary by itself would still go over the limit. That alone would mean about $7,220 withheld. The stock portion is what turns a manageable trim into most of a year’s checks.
Vesting Day May Not Be the Day Social Security Counts
The date on the W-2 is only part of the picture. Social Security looks at when the work behind a payment was done. Payments that arrive after retirement for work you did before you retired generally don’t count against the limit. If he stops working and shares later vest for work he completed before claiming Social Security, the plan documents could support excluding them from the earnings test. Many plans cancel unvested shares when an employee leaves, though, so he should check his grant agreement first.
Withheld benefits aren’t simply paid back in a lump sum. Full retirement age is 67 for anyone born in 1960 or later. At that point, earnings no longer shrink his benefits, and Social Security recalculates his monthly payment to account for the months it withheld. His later checks get bigger, but that won’t help him cover his bills in 2027.
The stock also impacts his taxes. Up to 85% of his benefits can become taxable once half his benefits plus other income exceeds $34,000 for a single filer, and a vesting year can easily push him past that. It’s one of a whole catalog of obscure retirement rules that quietly cost real money, the kind we mapped out in a free guide to retiree tax traps.
Check the Grant Agreement Before Counting on Every Check
Before the first shares vest, he should add his salary to a realistic estimate of the vesting value and give that number to Social Security. A good estimate lets the agency adjust his checks as the year goes. A low guess means an overpayment letter later, like the one that surprised the retiree above.
If he’s thinking about leaving before the grant fully vests, he should ask HR in writing what happens to the unvested shares. He should also keep documents showing which period of work each portion pays back. That record is what supports a special-payment claim.
His unsold shares can be valuable pay and a cash-flow problem at the same time. The share price on vesting day, his birth month and how Social Security determines each payment can each change the result, so his own documents matter more than any general rule.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
