Collecting Social Security? COLA Isn’t The Only Change For 2026

About 75 million Americans who receive Social Security benefits will see a 2.8 percent boost in their January deposits as the 2026 cost-of-living adjustment takes effect. The actual benefit of this increase is debatable, particularly for the estimated 22 million Americans who depend on Social Security as their soles source of income.

The average Social Security recipient will see a monthly increase of about $56, increasing monthly benefits from roughly $2,015 to $2,071. The highest benefit available at full retirement age is $4,152 in 2026, up from $4,018 in 2025.

The COLA isn’t the only thing changing for Social Security recipients in 2026. A key change allows older workers who want to continue working while still tapping their Social Security accounts to earn more without a penalty.

The Social Security Administration generally announces the COLA on Oct. 15, but that didn’t happen until Oct. 24 this year because the government shutdown delayed a key inflation report used to figure it.

The government bases the annual Social Security increase on the Consumer Price Index from the third quarter of 2024 through the third quarter of 2025. The increase reflects inflation and affects both Social Security and SSI, although rising Medicare Part B costs offset some of the relief.

How Medicare Costs Affect Benefits

The extra $56 a month isn’t expected to meaningfully improve beneficiaries’ overall financial situations. The COLA is intended to offset inflation, but some analyses suggest it falls short of actual inflation rates for key expenses like health care, housing and food.

Nearly one-third of the average increase will be eaten up by the premium increases for Medicare Part B, which jumped by $17.90 to $202.90 a month, effectively reducing the average retiree’s COLA to about $38 a month before other costs.

Medical care costs overall increased 3.3 percent from November 2024 to November 2025, according to the Labor Department’s November Consumer Price Index.

How COLA Compares With Inflation

Overall, price increases outpaced November’s 2.7 percent annual inflation rate in areas that can greatly affect Social Security recipients’ ability to make ends meet, especially for those who have no other source of income.

Energy costs were up 4.2 percent due to rising fuel oil prices, which could make it harder for recipients to heat their homes. Natural gas cost 9.1 percent more than a year earlier, and electricity increased 6.9 percent. Housing costs were up 3 percent.

Grocery prices saw a more modest increase of 1.9 percent, but prices increased 4.7 percent overall on protein staples like beef and other meats, poultry, fish and eggs.

About 77 percent of older adults surveyed by AARP in September said a 3 percent COLA for 2026 would not be enough to help them keep up with rising prices.

Since 2000, the average COLA has been approximately 2.6 percent. This average includes the significant price spikes that led to benefit increases of 5.9 percent in 2022 and 8.7 percent in 2023.

What Else Is Changing?

People who want to collect benefits before reaching the full retirement age can only earn a limited amount of income before they risk having benefits withheld. These people can now earn up to $24,480 annually before the Social Security Administration begins temporarily withholding some benefits.

This higher threshold — up from $23,400 in 2025 — means older Americans who are still working can earn more income while continuing to receive their monthly retirement or survivor payments.

On income beyond $24,480, $1 in Social Security will be withheld for every $2 earned.

When Will Deposits Be Made?

Supplemental Security Income payments were scheduled to go out on Wednesday, Dec. 31. Because New Year’s Day is a federal holiday, the Social Security Administration pays SSI on the last business day of the prior month.

The maximum federal SSI payment for a single person increases to $994 in 2026. SSI is a needs-based federal program for low-income elderly, blind, or disabled people, funded by general taxes, with no work requirement. SSI is for those with limited income and resources, and qualifying for SSI often unlocks Medicaid.

The Jan. 2 scheduled date for payments for those receiving both Social Security and SSI also was adjusted because Jan. 3 falls on a Saturday. Long-term and older recipients who started receiving benefits before May 1997 and enrolled under earlier Social Security rules were also scheduled to be paid that day.

Other recipients will see payments based on their birthdays on the second, third and fourth Wednesdays of each month. Here’s when payments will arrive:

• Jan. 14: People with birthdays between the first and 10th of their birth months;
• Jan. 21: People with birthdays between the 11th and 20th of their birth months;
• Jan. 28: People with birthdays between the 21st and 31st of their birth months.

Is The Tax Rate Changing?

The primary source of funding for Social Security come from a 12.4 percent tax on most workers’ earnings. This tax is split between the employee, who pays 6.2 percent through FICA withholding from their paycheck, and the employer, who pays the other 6.2 percent. Individuals who are self-employed pay the entire 12.4 percent when filing their annual tax return.
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The maximum work income subject to Social Security tax is adjusted annually with wage trends. For 2026, the limit rises to $184,500, up from $176,100 in 2025. Earnings above this, and non-work income, such as investments or retirement withdrawals, are not taxed. The tax rate remains unchanged.

Are Benefits Taxed?

A new tax break approved as part of the budget reconciliation act passed by Congress in July allows people 65 and older to reduce their taxable income by up to $6,000. The full deduction is available to individual filers with a modified adjusted gross income up to $75,000 ($150,000 for married couples filing jointly).

A reduced deduction is available for single filers with incomes up to $175,000 and married couples up to $250,000.

The temporary deduction, effective through the 2028 tax year, is projected to cost Social Security $168.6 billion in lost tax revenue over 10 years, potentially accelerating the depletion of its trust funds by up to six months, according to an Aug. 5 analysis from Social Security/s chief actuary.

Federal income taxes on Social Security benefits fund the program’s retirement/survivor and disability trust funds. The actuary projects the new deduction will cause the retirement/survivor fund to run short in the fourth quarter of 2032, instead of the first quarter of 2033.

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