What Social Security Changes in 2026 Mean for Your Retirement

Social Security is undergoing several important updates in 2026, and these changes will influence everything from your monthly benefits to how much of those benefits will be taxed. Staying ahead of the updates can make a meaningful difference in your retirement income plan.

To start, benefits are getting a 2.8% cost-of-living adjustment. For most retirees, that means the average benefit rises from about $2,150 to roughly $2,271 per month around $56 more. Married couples will see their combined average move to approximately $3,328. SSI payments will increase by the same percentage. While this adjustment helps, many retirees may still feel pressure from rising costs that continue outpacing COLA increases.

One of the biggest issues remains taxation. Social Security’s tax thresholds were set decades ago and have never been adjusted for inflation. In 1983 and 1993, lawmakers set provisional income thresholds that determined whether benefits were taxable. Back then, the average Social Security check was about $460. Today it’s more than $2,000, pushing more retirees into taxable territory even though the rules never changed. Provisional income including half of your Social Security benefit plus all other income will continue to determine whether you owe taxes on up to 85% of your benefit.

The taxable wage base is also rising. In 2026, workers will pay payroll taxes on earnings up to $184,500, up from $176,100 in 2025. Employees and employers each pay 6.2% or 12.4% for the self-employed. Higher earners will see more withheld during their working years, but this can also raise their future benefits because Social Security calculations incorporate earnings up to the taxable wage cap.

Speaking of calculations, Social Security’s bend points the breakpoints used to determine how much of your income counts toward your benefit will also adjust in 2026. The new formula applies 90% to the first $1,286 of your AIME, 32% to amounts between $1,286 and $7,749, and 15% to income between $7,749 and $15,375. These adjustments slightly increase benefits for new retirees entering the system.

For anyone claiming early, changes to the earnings test also matter. In 2026, if you claim before full retirement age, you can earn up to $24,480 before $1 is withheld for every $2 you earn above the limit. In the year you reach full retirement age, you can earn up to $65,160 before $1 is withheld for every $3 over the limit. After full retirement age, the earnings limit disappears entirely.

The amount needed to earn Social Security credits is also increasing. In 2026, you’ll need $1,890 in covered earnings per credit, with a maximum of four credits per year. You must accumulate 40 credits to qualify for benefits, although the size of those benefits still depends on your highest 35 working years.

Another update involves taxes for seniors. A temporary federal tax deduction for adults 65 and older will run through 2028. The deduction is $6,000 for individuals and $12,000 for married couples when both spouses are 65 or older. It phases out beginning at $75,000 of income for singles and $150,000 for married couples. For some retirees, this deduction may lower taxable income enough to reduce how much of their Social Security benefit becomes taxable.

These updates have practical implications. Even with a COLA increase, rising Medicare premiums and healthcare costs may offset much of the gain. Higher wage-based taxes affect cash flow for high earners. The earnings test can surprise early claimers who continue working. And the new senior deduction may create opportunities for coordinated tax planning.

Looking ahead, trust fund solvency remains the larger issue. Major Social Security reform will likely be unavoidable sometime in the early to mid-2030s. Until that happens, these smaller adjustments will continue shaping how retirees plan their income, taxes, and claiming strategies. Now is a good time to review your projected benefits, revisit your claiming plan, and model how your taxes may change under the new rules. Staying informed is one of the most effective ways to strengthen your financial position heading into retirement.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.