Upcoming alterations to Social Security benefits in 2026 could leave retirees in a state of shock
Prepare for some significant changes in Social Security benefits, taxes, and retirement earnings test amounts in 2026. Here's what you need to know:
Cost of Living Adjustment (COLA)
The Social Security Administration (SSA) will announce the official COLA for 2026 on October 15, 2025. This adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) comparing the third quarters of 2024 and 2025. The COLA will determine the percentage increase in Social Security benefits to offset inflation, preserving purchasing power for retirees.
Increase in Wage Base for Payroll Taxes
The taxable maximum amount of earnings subject to Social Security payroll taxes will increase for 2026. Following the pattern of previous years, wage ceilings rise annually to reflect wage growth. For instance, it rose from $168,600 in 2024 to $176,100 in 2025, so a higher ceiling is anticipated in 2026, meaning higher-earning workers will pay Social Security taxes on a larger portion of their income.
Full Retirement Age (FRA)
The Full Retirement Age (FRA) remains 67 for individuals born in 1960 or later, effective for 2026. Those born in 1959 have a FRA of 66 years and 10 months.
New Maximum Monthly Benefit
Due to inflation adjustments and the COLA increase, the maximum Social Security monthly retirement benefit payable at full retirement age will increase in 2026, although the exact amount depends on the forthcoming COLA figure.
Work Credits and Eligibility
The number of work credits required remains at 40, but the amount of earnings needed to earn a single credit will increase from the 2025 figure of $1,810 per credit to a higher amount in 2026, reflecting wage growth.
Retirement Earnings Test (RET) Thresholds
While explicit 2026 figures are not yet finalized, the earnings limits at which Social Security benefits are reduced for retirees under full retirement age are adjusted annually based on national wage growth. Expect an increase in these thresholds for 2026, allowing beneficiaries to earn more before benefit reductions apply.
Taxation of Social Security Benefits
New legislation passed in 2025 eliminates federal income taxes on Social Security benefits for nearly 90% of beneficiaries starting soon. This tax relief is expected to apply fully in 2026, reducing the tax burden on most retirees’ Social Security income.
In summary, Social Security benefits in 2026 will be higher primarily due to the annual COLA and increased wage bases; retirement age remains steady at 67 for the relevant birth cohorts. Taxes on benefits will reduce for most, and earnings limits for applying the retirement earnings test will increase, allowing retirees to work and earn more before penalties. Exact COLA and threshold numbers will be finalized and announced closer to the end of 2025.
Key Figures
- Most workers pay 6.2% of their income to the Social Security program.
- The updated RET amounts for 2026 are estimated to be $24,360 and $64,800, respectively.
- Social Security is primarily funded with payroll taxes, but the amount of income subject to taxation is limited under current law.
- In 2025, the maximum tax burden is $10,918.20 (i.e., $176,100 multiplied by 6.2%).
- The trustees estimate the maximum taxable earnings limit will rise to $183,600 in 2026.
- The statement "Workers pay Social Security taxes on all of their income" is false.
- The lower RET limit in 2025 is $23,400, and workers in this category will have $1 in benefits withheld for every $2 in income above the limit.
- The upper RET limit in 2025 is $62,160, and workers in this category will have $1 in benefits withheld for every $3 in income above the limit.
- The maximum taxable earnings limit is $176,100 in 2025, but it tends to increase each year to account for changes in national wage levels.
- In 2026, the maximum tax burden is estimated to increase to $11,383.20.
- With the cost of living adjustment (COLA) increase in 2026, retirees can expect an enhancement in their Social Security benefits, ensuring their purchasing power remains preserved against inflation.
- In 2026, the taxable maximum amount of earnings subject to Social Security payroll taxes is projected to rise, indicating that higher-earning workers will pay Social Security taxes on a larger portion of their income.
- Those planning for retirement should consider the impact of changes in the Retirement Earnings Test (RET) thresholds in 2026, as these changes will allow beneficiaries to earn more before Social Security benefits are reduced.
- As more retirees become exempt from federal income taxes on Social Security benefits, it's essential to be aware of the growing importance of effective wealth management, personal finance, and health-and-wellness practices, such as fitness-and-exercise routines, to maintain financial stability during retirement.
