A Key Social Security Rule Is Changing in 2027 - Here’s Who Could Lose Part of Their Check

Sometimes, the first step into retirement is adding a Social Security check to the paycheck you already receive. Continuing to work can boost a fixed income while keeping you connected to a job or business you like, though claiming benefits before your full retirement age means you'll need to watch how much you earn.

Both earnings limits are going up in 2027, allowing you to earn more before Social Security temporarily withholds some of your benefits. But before you commit to extra hours, it helps to know which income counts toward those limits so you can make the right moves for your retirement budget.

More older Americans are working into their retirement years

About 19% of Americans 65 and older were working or looking for work in 2025, according to the Bureau of Labor Statistics. Among those ages 65 to 69, the share was roughly 38% of men and 29% of women. The agency expects participation among older adults to increase over the next decade.

Many Americans also start Social Security before full retirement age. At the end of 2025, about 2.6 million people ages 62 to 64 received retired-worker benefits, averaging $1,451 a month, with millions more collecting at 65 and 66. Those who continue working may fall under Social Security's retirement earnings test, which determines whether benefits must be withheld.

Your age determines which earnings limit applies in 2027

Full retirement age depends on your birth date and is 67 for people born January 2, 1960, or later. The 2027 earnings limits work as follows:

• Under full retirement age all year: You can earn $25,560 before Social Security withholds $1 in benefits for every $2 above the limit.
• Reaching full retirement age during 2027: You can earn $67,920 in the months before reaching that age, with $1 withheld for every $3 above the limit.

Starting with the month you reach full retirement age, earnings no longer reduce your benefits under this test.

Going over the lower limit can mean months without a check

If you earn $40,000 while remaining under full retirement age throughout 2027, you'd be $14,440 above the limit. That would mean $7,220 in benefits withheld, equivalent to nearly five payments for someone receiving $1,451 a month.

Social Security can withhold entire monthly checks, so the reduction may leave you without a payment for several months. The higher 2027 limit does help, though. At the same $40,000 in earnings, your calculated withholding would be $540 less than in 2026.

The higher limit gives you more room before you turn 67

Suppose you reach full retirement age in September 2027. Only your earnings from January through August would count toward the higher limit, so here's how your benefits could be affected:

• Earn $70,000: You'd exceed the limit by $2,080, resulting in about $693 withheld.
• Earn $80,000: You'd be $12,080 over the limit, with about $4,027 withheld.

Once you reach full retirement age in September, you can earn as much as you like without any further withholding.

Pensions and investments don't use up your earnings allowance

The earnings test counts wages and net income from self-employment, including bonuses and commissions from your job. Pensions and annuities are excluded, as is investment income such as interest and dividends. Veterans benefits and other government or military retirement payments don't count either.

Suppose you receive $20,000 from a pension and $10,000 from investments while earning $24,000 at a part-time job.

Of the $54,000 coming in, only your job earnings count toward the limit, leaving you below the 2027 threshold with no benefits withheld under the annual earnings test. Some of your Social Security could still be taxable, since taxes follow separate rules.

Benefits withheld today can increase your payments later

At full retirement age, Social Security adjusts your retirement benefit to credit the months affected by earnings-related withholding. If you claimed 36 months early and later had six full months of benefits withheld, your payment would be recalculated as though you'd claimed 30 months early.

The adjustment comes through larger monthly payments, with the amount you recover depending on how long you collect.

Continued work could increase your benefit further if a higher-earning year replaces a lower one in your benefit calculation. Social Security reviews your earnings record annually to check for that increase.

Retiring midyear may let you use a monthly earnings limit

If you retire in July after earning more than the annual limit, your earlier paychecks don't necessarily prevent you from receiving benefits for the rest of the year. A special monthly rule, usually available in your first year of collecting, allows a full payment for each whole month Social Security considers you retired.

For 2027, the monthly earnings limits are $2,130 if you're under full retirement age all year and $5,660 for the months before reaching full retirement age that year.

If you're self-employed, Social Security also looks at how much you work in your business. Working more than 45 hours a month generally prevents you from qualifying as retired under this rule, and 15 to 45 hours can do the same in a highly skilled occupation.

Bottom line

The higher 2027 earnings limits give you more room to work while collecting Social Security, but you don't necessarily need to turn down work to stay below them. Depending on what you earn, the extra pay could leave you ahead even with some benefits withheld.

To avoid money mistakes, ask Social Security how those extra earnings would affect your upcoming checks. You'll have an easier time deciding whether to take on more hours when you know what you can count on to pay the bills.

You May Also Like

23 Ways To Get Money Without Getting A Second Job

By FinanceBuzz Editors

How To Save Money on Car Insurance: 12 Ways to Lower Rates

By Elyssa Kirkham

10 Things Seniors Born Between 1941-1969 Could Take Advantage Of

By FinanceBuzz Editors

19 Dumbest Things Smart People Waste Money On

By Team FBZ

7 Moves If You Want to Stop Living Paycheck to Paycheck

By FinanceBuzz Editors

7 Clever Ways to Crush Your Debt

By FinanceBuzz Editors

Save Money and Get Huge Discounts on Everyday Purchases

AARP Benefits

• Huge discounts on travel, groceries, prescriptions and more
• Access to financial planning resources and health tools
• Join AARP and get 25% off with automatic renewal

Become a member now!

---

Subscribe Today

Unlock the Best Banking Deals and Bonuses

From high-yield savings accounts to cashback checking and sign-up bonuses, we bring you the best banking offers to grow your money smarter.

or

SEE TOP BANKING OFFERS →

By submitting this form you agree to receive emails from FinanceBuzz and to the privacy policy and terms