Increases are aplenty for the Social Security program in 2026. Some increases will bring more money to retirees, whilst other increases will be bringing more revenue into the Social Security program. Here is a breakdown of some of the upcoming changes to the Social Security program and how it affects you.
2026 COLA increase
Every year, the COLA increase is probably one of the most anticipated announcements for seniors who receive Social Security benefits. The COLA, or Cost of Living Adjustment, is an increase implemented to all benefit amounts if inflation has increased from the previous year to the current year. By implementing this increase, a benefit check is able to retain its buying power (at least in part) as the cost of goods or services rise.
The 2026 COLA was officially announced by the Social Security Administration (SSA) on October 24th after some delays as a result of the government shutdown. The announcement revealed a 2.8% increase across all benefits starting in January 2026. On average, the COLA increase will add around $56 to benefit amounts. This would bring the average benefit check up to around $2,071.
Many experts and advocates feel that the COLA falls short in its purpose, with some blaming the formula used to calculate the increase. According to the findings in a September survey from AARP, “77 percent of older adults said a 3 percent COLA for 2026 would not be enough to help them keep up with rising prices. The average COLA since 2000 has been about 2.6 percent, even factoring in the spike in consumer prices that produced benefit increases of 5.9 percent in 2022 and 8.7 percent in 2023.”
Medicare premium hike
Retirees receiving Social Security will often be enrolled in Medicare as well. The unfortunate news for these enrollees is that the Medicare Part B premium is projected to increase substantially in the new year. Currently, the cost of the premium stands at $185, however, projections in the annual report say this could face an 11.6% increase. This would bring the cost up to around $206.50, and since the Part B premium is automatically deducted from benefits, the premium hike will eat away at the COLA increase before the benefit even reaches its recipient.
Social Security payroll tax
In order to claim benefits, you will need to pay into the Social Security payroll tax during your working career. You will put 6.2% of your earnings towards this, and your employer will match this contribution, making your total contribution 12.4%. This rate will remain unchanged, however, the amount of income that is considered for this contribution will be increasing.
This is called the maximum taxable earnings and for 2025 it is $176,100. Following the COLA announcement, the SSA stated that the maximum taxable earnings will be increased to $184,500 in 2026. This means that any income exceeding $184,500 does not count when making your contribution to the payroll tax.
Paying tax on benefits
Under current policy, up to 85% of your benefits can be taxed if your combined income exceeds a certain threshold. In July, the One Big Beautiful Bill Act was signed into law and included in this legislation was an additional tax deduction for seniors aged 65 and older. Due to the change in thresholds as a result of this temporary tax break, up to 90% of seniors will now be exempt from paying taxes on their benefits, as per the official channels.
Individual filers with a MAGI of up to $75,000 will receive an additional $6,000 tax deduction, whilst joint filers with a MAGI of up to $150,000 will receive an additional $12,000 tax break. This tax relief will only be in effect for a temporary period ending in 2028. This tax relief “will cost Social Security $168.6 billion in lost tax revenue over the next 10 years and hasten the depletion of the program’s trust funds by up to six months,” as per an August 5th analysis from Social Security’s chief actuary.
Retirement earnings test
If you have claimed benefits early and are continuing to earn an income whilst doing so, you may be subject to a retirement earnings test that could reduce your benefits if your income exceeds a certain threshold. This reduction is temporary and will phase out once you reach your full retirement age (FRA).
The retirement earnings income limits will be increasing in 2026. If you will not reach FRA for the full year, $1 in benefits will be lost for every $2 you earn above $24,480 in 2026. If you will be reaching FRA within the year, $1 in benefits will be lost for every $3 you earn above $65,160.
Work credits
In order to claim benefits, you will need to have a minimum of 40 work credits, which is earned by paying into the Social Security payroll tax. You can earn a maximum of 4 credits per year. Starting in 2026, the value of one work credit will increase by $80, and as such, one work credit will now equate to $1,890.