Key Takeaways
- In your first year of retirement, Social Security pays a full check for any month in 2027 when you earn $2,130 or less in wages and do no substantial self-employment, whatever you earned earlier in the year.
- For self-employed work, SSA counts your hours: 45 or fewer a month generally isn’t substantial, and under 15 never is.
- A 64-year-old who leaves a $70,000 job at the end of March 2027 and nets $20,000 from consulting would have $5,970 withheld under the annual test, but can collect all nine $2,000 checks, $18,000, under the monthly rule.
- Former executives and other highly skilled consultants can cross the line at 15 hours a month, and SSA asks for detailed proof, so a monthly log of hours matters.
If you’re planning to retire next year and keep consulting on the side, I have some good news: in your first year of retirement, Social Security cares more about how many hours you consult than how much you make doing it.
SSA announced 2027’s earnings-test limits last month, so anyone planning to leave work in 2027 can run the numbers now. A part-time consultant can come out thousands of dollars ahead.
Nine checks at stake
Let’s take a hypothetical. Say you’re 64, you leave a $70,000 job at the end of March 2027, and you start a $2,000 monthly benefit in April. You still like the work, so you pick up some consulting and net $20,000 by the end of the year.
Judged on the year as a whole, that much income would cost you a good chunk of those checks. But SSA doesn’t judge your first year of retirement only on the full year.
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The first year gets its own test
If you claim before full retirement age, SSA compares your earnings for the whole calendar year with a limit. In 2027 that limit is $25,560, and SSA withholds $1 of benefits for every $2 you earn above it. Wages from before you retired count toward it.
Withheld benefits aren’t lost for good: once you reach full retirement age, SSA recalculates your benefit to credit the months it held back. Still, that’s cash you’d wait years to see.
In one year, usually the first year of retirement, SSA also uses a monthly test. It pays a full benefit for any whole month you earn $2,130 or less in wages and don’t perform substantial services in self-employment, whatever you earned earlier in the year. That’s 2027’s figure. It’s $5,660 if you reach full retirement age in 2027. The Social Security Handbook calls that year a grace year, and each month that qualifies a non-service month.
For self-employment, SSA looks at the work itself. It judges substantial services by what you actually do, and your profit or loss doesn’t come into it. Under its regulations, 45 hours or less a month generally isn’t substantial, and less than 15 hours never is. Call it about 10 hours a week. More than 45 hours counts as substantial unless you can show you could reasonably be considered retired.
All nine checks, in full
Now back to your 2027. Your three months of salary come to $17,500. Add the $20,000 from consulting, and you’ve earned $37,500, which is $11,940 over the $25,560 limit. Half of that is $5,970, so under the annual test alone, SSA would withhold nearly three of your nine checks.
Now the monthly test. From April on you earn no wages, so you’re under $2,130 every month. If your consulting takes 45 hours a month or less, April through December are all non-service months, and SSA pays all nine $2,000 checks: $18,000.
You get them even though your consulting averages about $2,222 a month, above the $2,130 wage cap, because SSA measures self-employment in hours.
| Metric | Annual test alone | With the first-year monthly test |
|---|---|---|
| Benefits paid in 2027 | $12,030 | $18,000 |
| Benefits withheld | $5,970 | $0 |
Former executives get less room
The 45-hour line comes with a catch for a lot of consultants. SSA’s regulations say as few as 15 hours a month can be substantial if you’re managing a sizable business or working in a highly skilled occupation. SSA also looks at what the work is, how it compares with your job before you retired, and the setting, including the money invested and whether there’s a capable manager running things.
SSA still publishes one court case as a ruling. In it, a court held that a dentist’s practice counted as substantial services even if he’d worked under 45 hours a month, because dentistry is a highly skilled occupation. So if you ran a division and now consult 20 hours a month in your old field, you can’t count on the 45-hour line. Less than 15 hours, about three and a half a week, is the only amount SSA never treats as substantial.
SSA adds up your hours across every business you work in, and a retiree who says the work wasn’t substantial has to provide detailed proof. A month-by-month log of your hours, kept as you go, is the record you’d hand over.
You only get one grace year
The way I see it, if you’re leaving a job partway through 2027 and want to keep a hand in, this is one of the easiest wins in Social Security. Keep your consulting at or under 45 hours a month, and you can collect every check from the month you retire.
Just know it’s a one-year break. From 2028 until the year you reach full retirement age, SSA uses only the annual test, so all of your consulting income counts toward the limit, however few hours it takes. SSA will announce 2028’s limit next fall, and that’s the number to check your consulting plans against.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
