Key Points
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The Social Security Administration bases benefits on your average earnings from your 35 highest-earning years.
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If you’re still working, your 35 highest-earning years could change over time, resulting in larger future benefits.
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Some workers risk losing Social Security benefits to the earnings test if they make too much at their jobs.
When people talk about Social Security benefit boosts, conversation naturally turns to the cost-of-living adjustments (COLAs) that increase everyone’s checks each January. For many, this is the only time they see their checks rise during the year, but that’s not the case for all beneficiaries.
There is another reason your checks might increase in 2027, and it could give your COLA an extra boost next year. But you have to meet specific criteria first.
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Higher earnings from your job can lead to larger Social Security checks
The Social Security Administration bases your monthly benefit on your average monthly earnings over your 35 highest-earning years, adjusted for inflation, or your average indexed monthly earnings (AIME). But you don’t need a 35-year work history to apply. You can claim retirement benefits with as little as 10 years of work history, though in that case, you’d have a lot of zero-income years weighing down your benefit.
Working longer eliminates these zero-income years from your benefit calculation and increases your AIME, and it doesn’t always stop at the 35-year mark. If you work past this point, your AIME may continue to increase if you’re earning more now than you did in years past. This is true even if you’ve already applied for Social Security.
The government will reevaluate your AIME each year and, if necessary, increase your monthly checks. This could, in turn, increase your future COLAs because they’re a percentage of the benefit you qualify for.
An important caveat
However, it doesn’t always work out that way. Early Social Security claimers can actually see their checks shrink due to a little-known rule called the earnings test. This withholds $1 from your checks for every $2 you earn over $24,480 if you’ll be under your full retirement age (FRA) — 67 for most people — all year. If you’ll reach your FRA in 2026, you lose $1 for every $3 you earn over $65,160, but only if you earn this much before your birth month.
In some cases, people lose entire checks due to the earnings test. But that money isn’t gone forever.
When you reach your FRA, the Social Security Administration recalculates your benefit and increases your checks to make up for what it withheld before. The more you lost to the earnings test in the past, the larger the increase will be. This can also lead to larger COLAs down the road.
If you have any questions about how your work history affects your Social Security benefits, contact the Social Security Administration for more information.
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