Social Security In 2026 – What Retirees and Workers Should Know

TradingKey - In 2026, the U.S. Social Security program will be having a few significant changes that involve benefits, eligibility rules, taxation of earnings and retirement planning. These evolve from statutory and cost-of-living adjustments to the retirement age, but also further legislative actions, some of which have really been quite a bit more sweeping than what politicians have promised.

Cost-of-Living Adjustment and Benefit Levels

Social Security retirement and disability pay will increase 2.8% in 2026, as the pace of inflation has been slowing down compared to previous years. From National Average Wage Index / Cost-of-Living Adjustment (NAWI/ COLA) Scholar 2019 Courseware 2 Introduction NCSS, OASDI and SSI beneficiaries The COLA, based on changes in the Consumer Price Index (CPI), is applied to almost 71 million beneficiaries including retirees, survivors, disabled workers and Supplemental Security Income (SSI) recipients. The average monthly benefit is expected to increase by about $56 a month.

Maximum Monthly Benefits

In 2026, the limit will also go up for higher earners who receive maximum Social Security benefits. The maximum monthly benefit at full retirement age (FRA) is projected to be $4,152, and if you wait to claim benefits until age 70, you could get up to $5,251 a month. These changes contribute to saying yes to retirees’ purchasing power but do not necessarily say no to the real pressure of the cost of living, especially in areas with an above-average inflation rate.

Retirement Age and Eligibility Rules

Adjustment for Full Retirement Age (FRA)

Beginning in 2026, the gradual increase of the full retirement age will be fully implemented. Individuals born on or after January 1, 1960 will reach their FRA at 67. This final increase is the culmination of a multi-decade phase-in of the FRA reflecting increases in life expectancy. Claiming benefits prior to attaining an FRA will result in a permanent reduction in monthly payments.

Retirees working prior to attaining their FRA will have their Social Security benefit reduced based on the amount they earn while working. For the calendar year of 2026, if retirees work during the calendar year they attain an FRA, the first $24,480 of earnings will not reduce their Social Security benefits; i.e., for every $2 that retirees earn in excess of $24,480, $1 will be withheld from their Social Security benefit payment. Once retirees have attained their FRA, the earnings threshold increases to $65,160 for purposes of determining how much of the retire's Social Security benefit will be withheld.

These changes will affect how individuals plan for their retirement and work in the years after 2026.

Social Security Payroll Tax Rates and Revenue

Social Security applies an employee payroll tax of six point two percent and an employer payroll tax of six point two percent on all earnings, with no increase in either the employer or employee rate for 2026. However, the amount of paycheck subject to the employee portion of the Social Security payroll tax (maximum taxable wages) will increase from $176,100 in 2025 to approximately $184,500 for 2026. While wages beyond the maximum wages are not subject to the Social Security payroll tax, employees should keep this distinction in mind when doing tax planning, particularly high earners.

Although the Trump administration proposed to repeal federal income tax on Social Security benefits, the 2025 legislation passed creates a new deduction for seniors that increases the non-taxable income for a majority of older Americans; as such, greater portions of the Social Security benefits will be exempt from federal income tax; however, the deduction does not eliminate all federal income tax on Social Security benefits. Therefore, some taxpayers will still be required to pay taxes on some of their Social Security benefits, as the deduction phases out for higher income taxpayers.

Structure and Political Actions for Long-Term Issues

Legislative Change is Insufficient

Legislative changes made in response to efforts to eliminate waste in the Social Security Administration and prevent fraud have successfully reduced expenses. However, these reforms do not address any of the long-term financial problems of Social Security. According to current estimates, if no future legislative action is taken, the trust funds will run out sometime during the early 2030s. Without Congressional action, benefit reductions or delays in payments over the next several decades are likely to occur.

Actions by the Trump Administration

After his election, President Trump promised to protect Social Security and remove all taxes on benefits but did not deliver on either of these promises through subsequent legislative action. Although the creation of enhanced deductions will provide some seniors with a reduction in their tax liability, the ongoing issues related to the financing of Social Security will remain, which could lead to an accelerated timeframe for implementing broader Social Security reforms.

The Risks and Diverging Perspectives

That said, adjustments to Social Security benefits and changes to tax rules could provide substantial relief and clarity for retirees and folks approaching retirement for at least the year 2026; however, some structural problems still exist:

Program solvency — Without additional legislative changes, the long-term viability of Social Security's trust fund will continue to be at risk, which means there could be cuts to benefits or increased taxes to keep the Social Security program viable into the 2030s.

Inflation versus cost-of-living adjustment (COLA) — Inflation in key areas (like medical and housing costs) is anticipated to exceed the expected 2.8% COLA, and as a result, the real value of benefits may decrease for many recipients.

Earnings limits/early claiming — The recently changed earnings threshold will require many working retirees to carefully plan how much they work, so they do not have any temporary reductions in their benefits.

These and other considerations should encourage retirees and future beneficiaries to take Social Security planning into account as part of their overall retirement plan, rather than just relying on "nominal" benefit levels.

Investor's and Retirement's Planning Insight

If you are nearing retirement or already receiving benefits (collections) in 2026 it is important to do the following:

Consider the COLA Increase: The 2.8 percent increase adds to your income but may not completely offset your increased cost-of-living expenses like healthcare.

Understand how Taxes Interact: Any change to the taxable wage cap and/or the new higher deduction for seniors will impact your total tax liability and may change how you plan your retirement income.

Know how FRA and Limits on Earning Impact Your Benefit Payment Timing: Being aware of the effect that the social security full retirement age (FRA) and limits on earnings will have on the timing of your benefit payments will allow you to maximize your lifetime income.

Monitor Future Trust Fund Developments: Pay attention to what is happening in Congress because changes to benefit formulas, tax rates, or assumptions used in retirement planning could have a significant impact on your benefits.