3 Big Social Security Changes Will Be Announced This Week. They May Surprise Many Americans.

Source Motley_fool

Key Points

  • Social Security beneficiaries will receive a cost-of-living adjustment (COLA) next year to keep payments aligned with inflation.

  • Workers under full retirement age will be able to earn more income next year before Social Security benefits are withheld.

  • Social Security’s maximum taxable earnings limit will increase in 2027, such that high-income workers will pay more taxes into the program.

  • The $23,760 Social Security bonus most retirees completely overlook ›

Social Security updates various rules, payment amounts, and financial thresholds on an annual basis to keep benefits aligned with inflation and wages.

On Wednesday, Oct. 14, the Social Security Administration will announce changes that take effect in January 2027, some of which may catch most Americans by surprise. Read on to learn what to expect.

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Social Security card layered over U.S. dollar bills, symbolizing retirement income and government benefits

Image source: Getty Images.

Social Security benefits will get a cost-of-living adjustment (COLA) in 2027

Nationwide Retirement Institute reports that 63% of surveyed adults don't know that Social Security benefits are protected from inflation through annual cost-of-living adjustments (COLAs).

Social Security benefits lose purchasing power over time due to inflation, but annual COLAs offset the loss. COLAs are based on the percent change in the CPI-W (a subset of the Consumer Price Index) in the third quarter of each year (i.e., July to September). For instance, the CPI-W increased 2.8% in the third quarter of 2025, so Social Security benefits increased 2.8% in 2026.

The Social Security Administration cannot calculate the 2027 COLA until inflation data for September is published on Oct. 14. But The Senior Citizens League, a nonprofit advocacy group, estimates that benefits will increase 3.5% next year. If that figure is accurate, it will be the largest COLA in four years and well above the 20-year average of 2.6%.

Social Security's earnings limits will increase in 2027

Nationwide Retirement Institute reports that 43% of surveyed adults don't know that Social Security benefits are withheld from workers under full retirement age (FRA) with earnings that exceed certain limits known as retirement earnings test (RET) amounts.

There are two RET amounts: a lower limit for workers who will not reach FRA in the current year, and a higher limit for those who will. In 2026, the lower limit is $24,480; workers in this group have $1 in benefits withheld for every $2 in income above the threshold. The higher limit is $65,160; workers in this category have $1 in benefits withheld for every $3 in income above the threshold.

The RET amounts generally increase each year to account for changes in the average wage. Next year, the Social Security Board of Trustees estimates that the lower and higher limits will increase to $25,200 and $67,200, respectively. But the Social Security Administration will publish the official numbers alongside the 2027 COLA on Wednesday, Oct. 14.

Importantly, Social Security's earnings limits no longer apply once a worker reaches FRA. Benefits will not be withheld regardless of earnings. Also, any benefits withheld before FRA are gradually repaid, such that impacted beneficiaries recoup most or all of the money over a typical lifespan.

Social Security's maximum taxable earnings limit will increase in 2027

Nationwide Retirement Institute reports that 63% of surveyed adults mistakenly believe that workers pay Social Security taxes on all of their income. While Social Security is primarily funded by payroll taxes, the amount of income subject to that tax is capped.

In 2026, the maximum taxable earnings limit is $184,500. Any income above that level is not taxed by Social Security. However, the maximum taxable earnings limit tends to rise each year in line with changes in the average wage. For instance, the taxable maximum was $176,100 in 2025.

The Social Security Board of Trustees estimates the taxable maximum will hit $190,200 in 2027. In that scenario, an extra $5,700 would be subject to Social Security's 6.2% payroll tax, which means high-income workers would owe an additional $353.40 in taxes. But the Social Security Administration will announce the finalized figure on Wednesday, Oct. 14.

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