Social Security benefits increase on a yearly basis in order to account for growth in inflation. This increase is called the Cost of Living Adjustment (COLA) and the announcement made by the Social Security Administration (SSA) last Friday confirmed a 2.8% increase to all benefits starting in January.
The 2026 COLA is slightly higher than the 2025 COLA of 2.5%. When compared to the COLAs of the last decade, both the 2025 and the 2026 COLAs could be considered as below average. While a higher COLA does literally translate to more money in your benefit checks, the increase does come as a direct result of higher costs for goods or services.
Earlier this year, the amount in an average benefit check passed a historic threshold as it exceeded the $2,000 mark for the first time since the Social Security program’s inception. This is still not the highest benefit amount paid by the agency, however, it is still a noteworthy milestone to have reached.
2.8% COLA increase — what to take note of
On October 24th, the SSA announced a 2.8% increase for all benefits starting in 2026. This COLA increase will be implemented to all benefits disbursed by the SSA, including the Supplemental Security Income. According to the SSA, “over the last decade the cost-of-living adjustment (COLA) increase has averaged about 3.1 percent,” making the 2026 COLA fall on the lower side.
Along with the COLA increase, the maximum taxable income figure will also be increasing in 2026. The maximum taxable income or wage cap is the threshold for income that is considered when a worker makes their contribution towards the Social Security payroll tax. In 2025, the wage cap stands at $176,100. This means that any excess income beyond the $176,100 limit will not be taken into account when you are making your payroll tax contribution.
The wage cap will be increased in 2026 based on any increase to wage averages. According to the SSA, “the maximum amount of earnings subject to the Social Security tax (taxable maximum) is slated to increase to $184,500 from $176,100.”
More money, more problems?
With the 2.8% COLA increase that is slated to go into effect with January’s benefits, the average Social Security check will now come in at around $2,071 for an individual beneficiary. For married couples who are receiving benefits, the average check is estimated to come in at around $3,208 after the COLA increase.
The exact figure by which each respective beneficiary’s check will increase is going to differ from person to person. The SSA will begin sending out notices with a personalized breakdown of the increase as of early December.
Since the COLA for 2026 turned out to be higher than that of 2025, the cost of goods or services must also be rising. In addition to this, Medicare premiums are also projected to face a rather hefty increase in the new year. The official figure has not been confirmed yet, however, the annual report projects an increase of 11.6% to the Part B premium. Unlike the Part A premium which is typically free for seniors, the Part B premium has a cost attached to it.
In 2025, the Part B premium sets retirees back by $185 which is automatically deducted from their benefits. With the projected 11.6% increase, the Part B premium will soon cost $206.50, which will then bring down the value of the COLA increase significantly.
A higher Social Security check could also result in taxation if your adjusted gross income, any non taxable interest from bonds, and half of your Social Security benefit, all combined, exceed $25,000 for a single filer, and $32,000 for joint filers.
Parallel to this, the One Big Beautiful Bill Act also includes an additional tax break of $6,000 for single filers and $12,000 for joint filers if their income does not exceed $75,000 and $150,000 respectively. As a result, a higher number of seniors will now be exempt from paying tax on their benefits since the thresholds have increased. It is, however, worth noting that this tax relief is temporary and will end in 2028.