Qualcomm’s Layoff Notices Start in November. A 2026 Bonus Paid in January Shouldn’t Count Against His $25,560 Social Security Earnings Limit
A January paycheck stuffed with a bonus, unused vacation, and severance looks like a Social Security trap for a newly retired engineer, but the earnings test has a lesser-known rule that could change everything about how that money gets counted.
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Qualcomm (NASDAQ:QCOM | QCOM Price Prediction) chief executive Cristiano Amon told staff the chipmaker will cut jobs around the world in a “performance-focused reduction” after its annual employee reviews, Reuters reported on October 20, 2026, citing an internal memo. Notifications are set to begin in November. The number of layoffs remains unclear.
Picture a 63-year-old engineer at another company who receives a layoff notice in November. He decides he’s ready to retire, finishes out the year and arranges to start Social Security in January 2027. But his final paycheck won’t arrive until January, raising an unexpected question about how much he can earn without losing benefits.
A January Paycheck That Looks Like a Budget Buster
His last check arrives in January. It includes a year-end bonus and payment for his unused vacation, all of it for work he did in 2026. He will not yet qualify for full benefits at any point in 2027, so Social Security’s 2027 cost-of-living fact sheet puts his annual earnings limit at $25,560. If his countable earnings exceed that limit, Social Security withholds $1 in benefits for every $2 over the line.
His worry makes sense. If a large payout counts against 2027, it could use up much of that limit before he works a single new hour. Then even a small consulting job could put more of his benefits at risk.
Social Security Dates Wages by When You Did the Work
Social Security’s guide to how work affects benefits says that for people who work for wages, income counts when it’s earned rather than when it’s paid. The guide adds that money earned in one year and paid the next shouldn’t count as earnings for the year it arrives. Its examples include accumulated sick or vacation pay and bonuses.
For Social Security’s earnings test, those qualifying payments belong to work he finished in 2026. They won’t eat into his $25,560 earnings limit for 2027. The money can still be taxable in the year he receives it, but that’s a separate question.
Here is the wrinkle. Tax paperwork generally follows the payday, so that January money may show up on his 2027 W-2. Social Security reviews reported wages after the year ends. If nobody tells the agency the money goes to 2026, it may count against him at first and have to be fixed later.
Severance Can Qualify, Too
Social Security also lists severance among the payments that may qualify for this exception. If the money relates to the job he left, it may be excluded from his 2027 earnings limit. But severance packages differ, and the name on the check doesn’t settle how the payment is treated.
He should ask payroll for a breakdown of his bonus, unused vacation pay and severance, including what each payment covers. Those records can help him show Social Security why money received in January shouldn’t count as earnings from a new job.
Every Hour Worked in 2027 Counts in Full
The same rule works in the other direction. Anything he earns from new work after his benefits start counts toward the 2027 limit as usual. If he picks up consulting or a part-time job, that pay is measured against $25,560, and earnings above it cuts his checks at the $1 for every $2 rate.
Withheld benefits are not lost forever. Social Security says that once he qualifies for full benefits, it recalculates his benefit to give him credit for the months it reduced or withheld benefits because he earned too much. That cushions the blow, but it is still money he planned to have now and won’t see until later. Easing out of work in stages comes with its own set of tax traps, four of which we laid out in a free semi-retirement guide.
Get the Paperwork Sorted Before You File
Three steps keep this simple:
- Ask payroll for the itemized breakdown before you apply, while the people who know your file can still answer questions.
- When you file, tell Social Security which payments are for work completed in 2026, and ask whether your employer needs to provide additional documentation.
- Keep the statement. If a 2027 W-2 later leads to benefits being held back, that document is how you fix it.
Two final pay packages can look similar and still be put together very differently. What his statement says each dollar is for, more than the size of the check, will decide how much of his first year of benefits he actually keeps.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
