It's Not Just Larger Checks That Matter: This Big 2027 Social Security Change Could Put More Money in Your Pocket

There's a reason so many Social Security recipients are excited for Oct. 14 to arrive. That's the day the Social Security Administration is expected to reveal its 2027 cost-of-living adjustment, or COLA.

This year's COLA, which came in at 2.8%, meant recipients lost buying power due to an uptick in inflation. So many seniors are hoping a more generous raise will come their way in the new year.

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If current estimates are correct, they'll get their wish. The Senior Citizens League, an advocacy group, says the 2027 COLA will be 3.5%. Independent Social Security analyst Mary Johnson says the same, while AARP's projection sits slightly higher at 3.6%.

Of course, we won't know the final number for another couple of weeks. But even if it's a notch lower than these estimates, it's shaping up to be a sizable boost. But that's not the only reason Social Security checks might go up in the new year. Another change should be coming that could be a very positive update for certain Social Security recipients.

A new earnings-test limit should be revealed

Social Security's earnings test applies to beneficiaries who work before having reached full retirement age. There's a limit to how much people in that situation can earn each year before having benefits withheld.

This year's limit is $24,480 for people who won't reach full retirement age by Dec. 31. Once earnings exceed that limit, $1 in Social Security is withheld per $2 of wages, leading to smaller checks.

Now for those who will reach full retirement age by Dec. 31, the earnings-test limit this year is $65,160. Beyond that, $1 in Social Security is withheld per $3 of income.

Withheld benefits are eventually paid back in the form of larger checks once full retirement age arrives. In the near term, however, the rules can cause Social Security benefits to shrink. But the earnings-test limit is expected to increase in 2027. So Social Security recipients who work should be able to earn more money before having benefits withheld. Put another way, a higher earnings-test limit could lead to larger monthly checks.

Stay tuned for a number of key changes

Social Security's COLA is clearly hogging the spotlight these days, and understandably so. But that's not the only big change set to arrive in October.

If you're on Social Security, pay attention to program updates that get announced on Oct. 14. That way, you'll have a better idea of what to expect once the new year rolls around.

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