Three key Social Security updates for 2027: What retirees and workers need to know
1. Retirees are set for a pay rise
Earlier this month, the Social Security Administration (SSA) announced that beneficiaries of the Social Security program are to receive a 3.6% increase in their monthly payments, starting with January 2027’s benefits.
For retired workers, who account for more than three-quarters of the U.S.’s 71.6 million Social Security recipients, this means an average pay rise of around $75 per month, the agency said in a statement.
Per the SSA’s factsheet on the 2027 cost-of-living adjustment (COLA), the average retirement benefit will rise from $2,095 to $2,170.
Experts complain, though, that retirees are getting a raw deal out of the SSA’s method of calculating the COLA. Each year, the agency works out the adjustment by referring to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – inflation figures that focus on the purchasing experience of working-age Americans.
According to the Senior Citizens League (TSCL), a major non-partisan advocacy group, retirees would be better served if the SSA drew on the Consumer Price Index for Americans 62 Years of Age and Older (CPI-E). “The CPI-E regularly puts the spending inflation for seniors at two-tenths of a percentage point higher than the rate at which the CPI-W increases,” TSCL says.
Meanwhile, seniors on retirement benefits may also find themselves paying increased Medicare health-insurance premiums that eat into their Social Security hike for 2027.
2. If you carry on working while claiming retirement, you can earn more
One factor that can lower Social Security retirement payments – albeit temporarily – is a claimant’s decision to continue working even after filing for benefits.
If you have not reached what’s known as ‘full retirement age’ or FRA – 67 for anyone born in 1960 or later – the SSA restricts how much you can be paid from a job or self-employment if you’re also receiving retirement benefits.
Before the year you hit your FRA, the SSA withholds some or all of your benefits if your earnings exceed an initial, lower income limit. That cap then rises during the year you reach your FRA. In 2026, these maximums are $24,480 and $65,160 a year, respectively. In 2027, they will rise to $25,560 and $67,920.
Starting with the month in which the claimant hits their FRA, there are no longer any earnings restrictions.
It’s important to note, though, that withheld benefits are not lost forever: you are credited for docked payments after your FRA. What’s more, not all types of income count towards the SSA’s earnings limits. Learn more in this explainer on how a job or self-employment can impact monthly payments.
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3. The payroll tax cap is going up
Even if you’re still decades away from claiming retirement, next year also brings a Social Security change that affects you in the here and now. That’s because the limit on earnings that are subject to Social Security payroll taxes will rise in 2027: from $184,500 to $192,300.
The payroll tax rate will remain at 6.2% for employees and 12.4% for self-employed workers. “An individual with wages equal to or larger than $192,300 would contribute $11,922.60 to the OASDI [Old-Age, Survivors, and Disability Insurance] program in 2027,” the SSA says.
The payroll tax cap, which is adjusted annually to reflect changes in the national average wage, also represents the amount a worker needs to earn each year if they are to qualify for the maximum benefit when they retire.
To claim the top amount, Americans need to have contributed the maximum in payroll taxes for at least 35 years of their career. What’s more, they must wait until the age of 70 before applying for their retirement benefits
In 2026, the maximum retirement benefit stands at $5,181 per month; in 2027, that figure is set to rise to $5,358. If you apply for benefits at FRA, meanwhile, your maximum monthly benefit is to increase from $4,152 to $4,188.
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