Qualcomm Layoffs Begin in November, but a January 2026 Bonus May Not Count Toward Social Security's $25,560 Limit

A January paycheck loaded with a bonus, unused vacation pay and severance can look like a Social Security problem for a newly retired engineer, but a little-known earnings test rule may change how that money is treated.

Qualcomm (NASDAQ:QCOM | QCOM Price Prediction) chief executive Cristiano Amon told employees the chipmaker will reduce its global workforce in a “performance-focused reduction” after annual reviews, Reuters reported, citing an internal memo. Layoff notices are expected to begin in November, though the total number of cuts has not been disclosed.

Consider a 63-year-old engineer at another company who gets a layoff notice in November, decides to retire, finishes the year and plans to begin Social Security in January 2027. Because his last paycheck would not arrive until January, he may wonder how much of it could affect his benefits.

A January Paycheck That Seems to Blow Up the Budget

His final payment arrives in January and includes a year-end bonus plus compensation for unused vacation time, all tied to work he completed in 2026. He will not yet be eligible for full benefits at any point in 2027, so Social Security’s 2027 cost-of-living fact sheet sets his annual earnings limit at $25,560. If his countable earnings go over that amount, Social Security withholds $1 in benefits for every $2 above the limit.

The concern is understandable. If that payment is counted in 2027, it could absorb much of the limit before he even works another hour. After that, even a small consulting job could jeopardize more of his benefits.

Social Security Counts Wages by When the Work Was Done

Social Security’s guidance on how work affects benefits says wages are counted when earned, not when paid. It also says money earned in one year and paid the next should not be counted as earnings for the year it is received. The examples include accumulated sick pay, vacation pay and bonuses.

For purposes of the earnings test, those payments belong to work he completed in 2026. They should not reduce his $25,560 limit for 2027. The money may still be taxable in the year he receives it, but that is a separate issue.

There is one complication. Tax forms usually follow the payday, so the January payment may appear on his 2027 W-2. Social Security reviews reported wages after the year ends. If the agency is not told the money belongs to 2026, it could initially be counted against him and then have to be corrected later.

Severance May Also Qualify

Social Security also includes severance among the payments that may qualify for this exception. If the money is tied to the job he left, it may be excluded from the 2027 earnings limit. Still, severance arrangements vary, and the label on the check does not determine how the payment is treated.

He should ask payroll for a detailed breakdown of the bonus, vacation payout and severance, along with what each payment covers. Those records can help show Social Security why money received in January should not be treated as earnings from new work.

Any New Work in 2027 Still Counts Fully

The rule works the other way, too. Anything he earns from a new job after benefits begin counts toward the 2027 limit as usual. If he takes consulting work or a part-time position, that pay is measured against $25,560, and earnings above that level reduce benefits at the rate of $1 for every $2.

Those withheld benefits are not lost forever. Social Security says that once he qualifies for full benefits, it recalculates his payment to credit the months when benefits were reduced or withheld because he earned too much. That helps soften the hit, but it still means money he expected now arrives later. Phasing out of work also brings its own tax pitfalls, including several that can show up in semi-retirement.

Get the Paperwork Right Before Filing

Three steps can help keep this straightforward:

1. Ask payroll for an itemized breakdown before applying, while the people familiar with the file can still answer questions.
2. When filing, explain which payments were for work completed in 2026 and ask whether the employer must provide additional documentation.
3. Keep the statement. If a later W-2 for 2027 causes benefits to be withheld, that document can help correct the record.

Two final pay packages can look almost identical while being treated very differently. What the statement says each dollar is for, more than the size of the check, will determine how much of the first year of benefits he actually keeps.