Which limit applies to you
The test turns on one date: the month you reach full retirement age, which is 67 for anyone born in 1960 or later. Three regimes exist.
Before the FRA year, the annual exempt amount is $25,560 in 2027, equivalent to $2,130 a month. Earnings above it reduce benefits by $1 for every $2.
In the year you reach FRA, the exempt amount rises to $67,920, or $5,660 a month, and the ratio softens to $1 for every $3. Critically, only earnings in the months before the FRA month count, so a high salary late in that year cannot trigger a reduction.
From the FRA month forward, there is no test at all, at any earnings level. Someone who turns 67 in June 2027 can earn without limit from June onward.
2026 and 2027 side by side
| Provision | 2026 | 2027 |
|---|---|---|
| Annual limit, under FRA | $24,480 | $25,560 |
| Monthly limit, under FRA | $2,040 | $2,130 |
| Annual limit, year of FRA | $65,160 | $67,920 |
| Monthly limit, year of FRA | $5,430 | $5,660 |
| Withholding, under FRA | $1 per $2 | $1 per $2 |
| Withholding, year of FRA | $1 per $3 | $1 per $3 |
What the reduction actually costs
A 62-year-old collecting $2,000 a month who earns $45,560 in 2027 is $20,000 over the limit. Half of that, $10,000, is withheld — five full monthly checks. The remaining seven checks are paid. Because full checks are withheld rather than fractions, the pattern looks erratic even though the arithmetic is exact.
That $10,000 is not a forfeiture. At FRA, SSA applies an adjustment of the reduction factor: the actuarial reduction that was applied for early claiming is recomputed to remove the months in which no benefit was payable. The result is a permanently higher monthly amount, which is why heavy pre-FRA earnings often produce a smaller long-run loss than the headline suggests.
The tests are counted differently
The annual test compares total wages plus net self-employment income for the calendar year against the limit. The monthly test is available only in the first year of entitlement, and it works in the claimant’s favor: a month with earnings at or below the monthly limit is payable in full, regardless of the annual total. That matters for a January bonus or a short consulting engagement.
Wages count when earned, not when paid, with one exception that trips up bonus recipients: a payment for work performed before entitlement does not count if it is received after benefits begin. Self-employed claimants count net earnings, so a business loss reduces the total.
The gap between gross and net matters most for the self-employed. A consultant with $90,000 of gross receipts and $30,000 of deductible expenses has $30,000 of countable earnings, and the annual test uses the Schedule SE figure. Employees have no equivalent deduction: gross wages, including bonuses and vacation payouts, count in full.
One timing rule trips up new claimants. Earnings are reconciled against the estimate reported at filing, so a year with more work than expected produces an overpayment notice later, recovered by withholding future checks. That is arithmetic, not a penalty, but it arrives without warning if the estimate was never updated.