4 Big Social Security Changes That Could Happen in 2027 (Aside from a COLA)

No matter what your retirement
plans look like, there’s a good chance Social Security is a big
part of them. And if you rely heavily on those benefits to cover your retirement
expenses, then you may be very eager to find out what cost-of-living adjustment,
or COLA, will be coming your way in the new year.

Social Security COLAs are based on third-quarter inflation data. For this
reason, the Social Security Administration (SSA) generally announces upcoming
COLAs in October. But a COLA isn’t the only big change happening to Social
Security in 2027.

Here are four Social Security changes to prepare for in the new year that could
have an impact on retirees as well as workers.

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1. A higher earnings threshold before benefits are withheld

The SSA allows recipients of Social Security retirement benefits to continue
working. But if you haven’t reached full retirement age (FRA), which is 67 for
anyone born in 1960 or later, you’ll be subject to what’s called an earnings
test.

The earnings test allows you to earn a certain amount of money before
risking having Social Security benefits withheld. The limits of the test
typically change every year based on wage growth.

In 2026, you can earn up to $24,480 without having Social Security withheld if
you’re under FRA and won’t reach FRA by December 31. Beyond that, you’ll have $1
in Social Security withheld per $2 of earnings.

This year’s limit is higher if you’re under FRA but will reach FRA by December
31. In that case, you can earn up to $65,160 without having any Social Security
withheld. Beyond that, you’ll have $1 in Social Security withheld per $3 of
earnings.

You don’t have to worry about an earnings threshold once you reach FRA.
Furthermore, benefits withheld for earning too much money are not forfeited
forever.

In that case, once FRA arrives, the SSA recalculates your monthly benefits and
should return those withheld amounts to you over time. But for cash flow
planning purposes, it’s important to know how much you can earn before your
monthly Social Security checks start to get whittled down.

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2. A larger wage cap for Social Security taxes

Social Security’s main source of income is payroll taxes. Each year, the SSA
establishes a wage cap, and earnings beyond that limit are not taxed to fund
Social Security.

The wage cap in 2026 is $184,500, but that limit is likely to increase in 2027
due to wage growth. If you’re a higher earner, it’s important to pay attention
to the new Social Security wage cap, as it could leave you with a higher tax
bill. And it’s especially important to keep tabs on the wage cap if you’re a
higher earner and are self-employed.

Salaried workers split their Social Security taxes with their employers. But
those who are self-employed have to pay that entire tax bill on their own.

3. A higher earnings requirement to earn work credits

To qualify for Social Security benefits in retirement, you must earn 40 work
credits in your lifetime. You can earn up to four credits per year.

This year, the value of a single work credit is $1,890. Next year, that number
is likely to increase with wage growth.

If you work full-time, you shouldn’t have a problem earning four Social Security
work credits in a single year. But if you work part-time, you should pay
attention to how much money it takes to get those credits, especially if you
don’t have a very lengthy earnings history and are getting closer to retirement
age.

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4. A larger maximum monthly benefit

Because Social Security has a wage cap, it also has a maximum benefit it pays
every year. This year’s maximum monthly benefit at FRA is $4,152. That number is
likely to increase with inflation in 2027.

That said, you don’t have to claim Social Security at FRA. Waiting to file could
leave you with boosted benefits. You can accrue delayed retirement credits that
boost your monthly Social Security checks until the age of 70.

Bottom line

Social Security is one of the most important benefits for
seniors, so it’s important to keep track of all changes related to the
program. It’s also important to recognize that Social Security changes can
impact people who aren’t close to retirement age, so it’s not just older
Americans who should stay tuned for a big SSA announcement in October.

The good thing about these changes being announced this year is that there’s
time to prepare yourself financially. If you’re worried about having more income
taxed or having benefits withheld under the program’s earnings test, these are
things you can adjust for with advanced notice. So no matter your age, make sure
you’re not in the dark about these and other key Social Security updates.

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