2026 is just around the corner and the government has already warned that Social Security is going to undergo three major changes, some will be good for retirees and others… others not so much for those who are still working.
As you know, the pension system needs to be saved and modifications must be made. In short, the checks will go up a bit, workers who earn more will pay more taxes (which is logical) and those who retire early will be able to get more money with less reduction (this last part is very good news!).
A 2.8% COLA for 2026
The first change is the one we expect every year, the famous COLA that adds a small percentage of benefits to all checks to deal with inflation. This year, benefits will increase by 2.8%. Yes, we know it is not a huge raise, but it will be a few extra dollars added to your checks each month, we are not going to get picky, right?!
At least this boost will help cover a bit of the cost of food, medicine, rent…
More taxes for high salaries
This change does not affect everyone, so if you are one of those who barely survive on minimum wage, breathe easy. For those who earn more, the government will raise from 176,100 dollars to 184,500 dollars the maximum income subject to Social Security tax.
In other words, those who have high salaries will pay taxes on a larger part of their paycheck. It may seem unfair to you (not to us) but the system needs income to survive, and the logic is that they charge more to those who earn more, right? Cutting the salary of a precarious worker is not very normal or ethical…
And yes, with so many new retirees entering every year, it was necessary to adjust the cap to strengthen the accounts and ensure that the SSA lasts a few more years.
Early retirement
And here comes the third change, which will surely make many people happy. The income limits for those who retire before full retirement age (FRA) will increase!!
This means you will be able to work a little more, or keep that part-time job you like, without Social Security cutting so much from your check. So if for some reason we do not understand you decide to keep working while receiving your check, your benefits will not be reduced!
If you still do not reach full retirement age in 2026
You will be able to earn up to 24,480 dollars per year. If you go over, they will withhold 1 dollar for every 2 dollars extra.
If you reach FRA during 2026, the limit is 64,200 dollars. And they will withhold 1 dollar for every 3 you exceed the limit.
Why are these changes being made right now?
Because reality is different now, everything is going up, everything costs more, rent, food, medicine… and more and more people depend on SSA (and they have earned it with the sweat of their brow). So having a new economic plan is almost mandatory.
In short…
- Benefits go up so you do not lose purchasing power.
- Makes high salaries contribute more.
- Gives a bit more breathing room to those who work while receiving the benefit.
What should beneficiaries do?
You are probably tired of hearing this word, but plan your retirement, it is the key and we cannot give you better advice. If you are already retired, review how the COLA changes will affect you.
If you are going to retire before FRA, pay attention to your income limits, and if you are a high-wage worker, good luck, because tax burdens are coming!
2026 comes with many changes and we hope it can improve the economy of each Social Security beneficiary and help the system last a few more years (although young people, unfortunately, see it as more and more difficult…).