Five Social Security Changes Coming in 2027, Including Several Good News Items

Key Points

• Social Security is on track for a sizable cost-of-living increase in 2027.

• Recipients will also be able to earn more before benefits are reduced.

• A couple of changes affecting workers could be less welcome.

Social Security headlines are not always encouraging. The program is dealing with a significant funding gap that could eventually force benefit cuts, so the surrounding news is often negative.

Still, the 2027 update picture includes several improvements for beneficiaries. Not every change, however, will be cause for celebration.

Here are five Social Security changes worth knowing about.

1. Benefits are getting a 3.6% COLA

Social Security benefits receive a cost-of-living adjustment, or COLA, each year to help them keep pace with inflation.

Recent benefits increased by 2.8%. Next year, benefits are set to receive a 3.6% COLA. After that increase, the average retirement benefit is expected to rise from $2,095 to $2,170.

If Medicare Part B premiums also rise in 2027, people enrolled in both programs may see a smaller net increase. Even so, the overall boost appears to be a strong one.

2. The earnings test limit is rising

People who claim Social Security before reaching full retirement age and continue working are subject to the earnings test. If they go over the limit, some benefits are temporarily withheld.

For recipients who will not reach full retirement age by the end of the year, $1 in benefits is withheld for every $2 earned above $24,480. That threshold is rising to $25,560, giving older workers more room to earn income before benefits are affected.

For those who will reach full retirement age by the end of the year, the earnings test limit is $65,160. Above that amount, Social Security withholds $1 for every $3 earned. That limit will increase to $67,920.

3. The maximum benefit is rising

Higher earners may qualify for Social Security's maximum monthly benefit. The maximum at full retirement age is currently $4,152. It will rise to $4,188.

It is also possible to receive more by delaying a claim past full retirement age. Benefits can grow by 8% per year until age 70. That means while $4,188 would be the highest full-retirement-age benefit in 2027, some retirees could collect as much as $5,358 per month.

4. Higher earners will have to pay more Social Security tax

So far, the changes discussed have been positive. But not every update is good news.

The wage cap for Social Security taxes will rise from $184,500 to $192,300. As a result, higher earners will owe payroll taxes on an extra $7,800 in wages. At the current 12.4% rate, that works out to an additional $967.20 paid into Social Security.

Only self-employed workers would pay the full extra amount. Employees would split the cost with employers, leaving them with an additional $483.60 in Social Security tax.

5. It will be harder to earn work credits

To qualify for retirement benefits, you need 40 work credits over your lifetime, with no more than four credits earned in a single year. Credits are based on paying Social Security taxes on a set amount of wages.

At present, one work credit is earned with $1,890 in wages. That amount will increase to $1,970, making it harder to qualify for benefits.

There is clearly a lot changing with Social Security. For retirees, many of the updates are favorable. Workers, though, will need to pay attention to the higher wage cap and tougher work-credit requirement. No matter where you fit, it is worth staying up to date on Social Security changes.