Retirees Are Heading Back to Work. At 63, a $40,000 Job Could Cost Him $7,220 in Social Security Checks in 2027 Before His Benefit Rises Later© 24/7 Wall St.

Take a 63-year-old who claimed Social Security early and in 2027 takes a $40,000 job, expecting his paycheck to sit on top of his monthly benefit. Then Social Security starts holding his checks back, and the number on the notice is $7,220.

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Plenty of retirees end up in his position. They go back to work to cover higher costs, stay active or rebuild savings, only to discover that earning too much before full retirement age (FRA) can temporarily stop their Social Security checks. The surprise is that those missing checks aren't necessarily lost for good. Social Security has a way of making up for them later, though it can take years to come out ahead.

How a $40,000 Paycheck Turns Into a $7,220 Holdback

If you haven't reached FRA by year-end 2027, the earnings limit is $25,560. For every $2 you earn above that line, Social Security withholds $1 in benefits.

His salary clears the limit by $14,440, so half of that amount, $7,220, gets withheld.

Social Security collects this by holding back entire monthly checks, usually starting in January. Say his benefit is $2,000 a month. To cover the full amount, the agency keeps four checks, which adds up $8,000. Once his earnings for the year are reconciled, it sends back the extra $780.

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Retirees are heading back to work. At 63, a $40,000 job could cost him $7,220 in Social Security checks in 2027 before his benefit rises later