Planning to Work While Claiming Social Security Early? Make Sure You Know This 2027 Rule Update.

Your full retirement age is the age at which you're eligible to receive your base monthly benefit, called your primary insurance amount (PIA). If you were born in 1960 or later, your full retirement age is 67, but you can begin claiming benefits as early as age 62.

Plenty of people choose to begin claiming benefits at 62 without completely retiring or cutting off their income stream(s). There's absolutely nothing wrong with that. However, if you claim benefits early, you'll need to monitor your earnings, or you could be subject to Social Security's retirement earnings test (RET).

Beginning in 2027, the threshold for how much you can earn before facing the RET has increased. Here's what you need to know.

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The RET earnings limit for 2027

The RET earnings limit depends on whether you'll reach full retirement age that year. In years when you won't have yet reached your full retirement age, the limit is much lower than the year you will. Below is how the upcoming earnings limits compare to this year's limits:

Data source: Social Security Administration.

If you're subject to the lower limit and earn above that amount, Social Security will reduce your annual benefits by $1 for every $2 you earn over. For example, if you were to earn $35,560 next year, your annual benefits would be reduced by $5,000 ($10,000 over divided by $2).

If you're subject to the higher limit and earn above that amount, Social Security will reduce your annual benefits by $1 for every $3 you earn over. In this case, earning $97,920 would reduce your annual benefit by $10,000 ($30,000 over divided by $3).

The limit generally increases each year with increases in the National Average Wage Index, rather than with inflation, as with the annual cost-of-living adjustment (COLA).

A special rule for your first year

It's common for someone to retire in the middle or later part of the year. To prevent cases where that automatically puts someone over the earnings limit because they have been receiving regular paychecks up to that point, Social Security uses a monthly limit for the RET rather than the annual limit.

The monthly limit in 2027 is $2,130 if you're under your full retirement age, and $5,660 if you'll hit your full retirement age next year. That's up from this year's limits of $2,040 and $5,430, respectively.

A key difference between the standard RET and the first-year rule is that if you go over the monthly limit, Social Security will withhold your entire check for the month instead of reducing it. For example, if you're subject to the lower limit and earn $2,200 in a month, you won't receive a check that month.

Also note that in your first year, there's a limit on how much you can work, regardless of the pay. You can't work more than 45 hours per month in what Social Security calls "substantial services in self-employment." If it's a highly skilled occupation -- say, a doctor, lawyer, or someone managing a nice-sized business -- the limit is between 15 and 45 hours.

If you retire mid-year, you'll switch to the annual limit on Jan. 1 of the upcoming year. For instance, someone retiring in June 2027 would switch over beginning on Jan. 1, 2028.

Benefits aren't lost forever

When you have your benefits reduced for going over the earnings limit, Social Security doesn't keep them for itself. It essentially holds on to them for you until you reach your full retirement age. Once that happens, Social Security recalculates your monthly benefit and steadily adds back what it withheld.

The time it takes to receive all your withheld benefits back will vary, but it likely won't be within the first few years after you reach full retirement age. That said, Social Security says most people will live long enough to receive back most or all of their withheld benefits.

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