He Left Big Tech at 64 for an AI Startup That Paid Him in Stock. Social Security Counted It Before He Sold a Share.

Restricted stock counts as W-2 wages when it vests, not when sold, triggering Social Security's earnings test even on illiquid private-company shares.

In 2026, a $15,000 salary plus $75,000 in vested stock creates $90,000 in wages, potentially eliminating an entire year of Social Security checks.

Before signing a startup offer, map every vesting date and model the Social Security withholding impact, since withheld benefits aren't paid back as a lump sum.

A 64-year-old engineer leaves a large technology company for a buzzy AI startup. He has already started collecting Social Security, and the new company preserves its cash by paying him a modest salary plus restricted stock. Six months later, the first block of shares vests. The stock remains in his account, the startup is still private and he has no easy way to sell. Then Social Security begins withholding his benefits because his earnings were too high.

He is baffled. The shares may be valuable someday, but they cannot cover this month's expenses. That is the tension buried inside startup compensation. Social Security does not wait for an acquisition, an IPO or a willing buyer. Stock can become wages long before it becomes cash.

The Shares Can Become Wages Before They Become Spendable

Restricted stock is generally treated as compensation when it vests. The amount added to wages is the stock's fair market value on that date, minus anything the employee paid for it. The employer reports that value on his W-2 and withholds payroll taxes just as it would on salary.

Selling is a separate event. If he keeps the shares for another three years, their value at vesting was still wages in the earlier year. Any additional appreciation generally becomes a capital gain when he eventually sells. Social Security cares about that dividing line. Wages count under the retirement earnings test. Capital gains do not.

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