Social Security recipients will see their monthly payments increase in 2026, but the extra money will arrive alongside higher health care costs and a series of policy changes that complicate the picture.
Inflation, wage growth, and recent federal legislation are reshaping the program that supports more than 70 million Americans and is funded by nearly 185 million workers.
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The headline change is a 2.8 percent cost of living adjustment for 2026, up from 2.5 percent the year before. The increase applies across the board, covering retirement benefits, survivor and family benefits, Social Security Disability Insurance, and Supplemental Security Income.
According to the Social Security Administration, the average retirement benefit will rise by about $56 per month, moving from $2,015 to $2,071 beginning with January payments.
SSI recipients will see the higher amount arrive slightly earlier, with their first COLA adjusted payment issued on December 31.
Even so, many older Americans are not convinced the increase will go far enough. In a September survey conducted by AARP, 77 percent of respondents said a 3 percent COLA would still not be enough to keep up with rising prices.
Since 2000, the average annual adjustment has been about 2.6 percent, even when factoring in the unusually large increases driven by post-pandemic inflation earlier in the decade.
Medicare premiums and tax changes blunt the COLA boost
For many beneficiaries, the COLA gain will be partially offset by higher Medicare costs. The Centers for Medicare & Medicaid Services announced that the standard Medicare Part B premium will rise from $185 to $202.90 per month starting in January, a 9.7 percent increase. Because most enrollees have premiums deducted directly from their Social Security checks, that hike effectively reduces the monthly COLA benefit by $17.90.
On the funding side, the Social Security payroll tax rate remains unchanged at 12.4 percent, split evenly between workers and employers, with self-employed individuals paying the full amount.
What is changing is the income cap. In 2026, earnings up to $184,500 will be subject to Social Security taxes, up from $176,100 in 2025. Income above that threshold is not taxed for Social Security purposes.
A new temporary tax deduction could offer relief for many older Americans. Beginning in 2026, taxpayers age 65 and older may qualify for a deduction of up to $6,000, reducing the amount of Social Security income subject to federal tax.
Individuals with modified adjusted gross income up to $75,000, or married couples up to $150,000, can claim the full deduction, with partial deductions available at higher income levels. The provision runs through the 2028 tax year.
That benefit comes with long term consequences. Social Security’s chief actuary estimates the deduction will reduce tax revenue by $168.6 billion over ten years and accelerate trust fund depletion by as much as six months. Under current projections, the retirement and survivor trust fund would face a shortfall in the fourth quarter of 2032 rather than early 2033.
Earnings limits are also increasing for beneficiaries who work before reaching full retirement age. In 2026, $1 in benefits will be withheld for every $2 earned above $24,480, up from $23,400 in 2025. In the year a beneficiary reaches full retirement age, the threshold rises to $65,160, after which the earnings test no longer applies and withheld benefits are gradually restored.
Different rules apply to SSDI recipients. In 2026, the monthly income limit defining substantial gainful activity will increase to $1,690 for most beneficiaries and $2,830 for those who are blind.
Workers earning credits toward future benefits will also see a small change. In 2026, one Social Security credit will be earned for every $1,890 in income, meaning workers must earn $7,560 to secure the maximum four credits for the year.