Millions of retirees will see their long-awaited Social Security boost evaporate as new 2026 rules and rising costs collide.
Imagine finally getting a raise, only to have half of it snatched away before it hits your bank account. That’s the reality facing millions of Social Security beneficiaries in 2026. The coming year brings a flurry of big changes, driven by new federal policies and economic shifts that affect the more than 70 million people receiving Social Security benefits and the estimated 185 million workers who fund the system.
This massive financial shift is precisely why understanding these rules is critical. While the average retirement benefit is set to rise by about $56 a month, a projected surge will immediately consume a significant portion of that gain. This zero-sum game is precisely why understanding these rules is critical. Here is everything you need to know about Social Security and Medicare in 2026.
Benefits Tax
Now for a genuine piece of good news (with a catch, naturally). A new, temporary tax break for people ages 65 and older could finally reduce or eliminate income taxes on Social Security benefits for millions.
The catch? This tax giveaway, which runs through the 2028 tax year, has a significant financial impact on the program itself. Social Security’s chief actuary projects that the $168.6 billion in lost tax revenue will hasten the depletion of the program’s trust funds by up to six months. This means the retirement and survivor fund is now projected to run short in the fourth quarter of 2032 rather than the first quarter of 2033.
COLA
The Cost-of-Living Adjustment (COLA) is intended to be the great equalizer, providing an annual shield against inflation. For 2026, the SSA has officially announced a 2.8% COLA for individuals receiving Social Security and Supplemental Security Income (SSI) payments.
This represents a modest step up from the 2.5 percent COLA in 2025, and the agency estimates that the average retirement benefit will increase from $2,015 to $2,071, with the larger checks taking effect in January 2026. This increase is universal, covering survivor, family, and disability benefits too.
However, let’s be honest: does a $56 average boost feel like it’s keeping up? 77% of older adults said a 3 percent COLA for 2026 would not be enough to help them keep up with rising prices. This sentiment highlights a significant flaw in the COLA formula, which many argue does not accurately reflect the substantial costs of senior expenses, such as medical care and housing. The $56 feels minimal because, well, it is.
Medicare Part B Premiums
Here is where the government takes back its ‘gift.’ While the COLA gives with one hand, the standard monthly premium for Medicare Part B is projected to jump by 11.6 percent, climbing from $185 to $206.50 in January. For the majority of retirees, Part B, which covers doctor visits, is automatically deducted from your Social Security check.
This projected premium increase immediately eats up $21.50 of your monthly COLA, reducing your net gain by nearly half. When the official figures are released later this fall, you’ll see the cold math on your notice. The net benefit you’ll be left with is drastically smaller than the gross increase the headlines trumpet.
Social Security Taxes
If you’re still working or are a high earner, pay attention. Social Security is primarily funded by a 12.4 percent tax on your earnings (split evenly between you and your employer). While the tax rate remains unchanged, the ceiling on what income is subject to that tax is being lifted, in line with national wage trends.
In 2026, you’ll be paying the Social Security tax on work income up to $184,500 (up from $176,100 in 2025). Earnings above that threshold are exempt. So, while most Americans won’t notice a difference, this change means high earners will contribute substantially more to the system next year.
Social Security Earnings Test
If you retired early and are still working part-time, the infamous earnings test dictates how much you can make before your Social Security checks are temporarily reduced. The good news is that the income limits are set to increase in 2026.
For those who will not reach Full Retirement Age (FRA) until a later year, the limit rises to $24,480 (up from $23,400 in 2025). If you earn more than that, $1 is withheld from your benefit for every $2 you go over. For those hitting their FRA in 2026, the limit rises to $65,160 (up from $62,160 in 2025) before the penalty kicks in, and remember, once you reach your FRA, the test vanishes completely.
Earning Credits
For younger workers, or those getting back into the workforce, you need to earn 40 Social Security credits, essentially 10 years of paying into the system, to qualify for retirement benefits. The amount of income required to earn a single credit changes annually.
In 2026, you will earn one credit for earnings of $1,890, which is $80 more than the 2025 level. This means you will bank your maximum of four credits for the year once your work income reaches $7,560. It’s the minimum entry fee to ensure you’ve paid your dues before you can claim your lifetime benefits.
Key Takeaway
The much-anticipated COLA increase for 2026 is not the financial windfall many hope for; instead, it provides only minimal relief, as a significant portion of the raised benefit will be immediately consumed by the projected hike in Medicare Part B premiums.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information. It is not intended to be professional advice.
Disclosure: This article was developed with the assistance of AI and was subsequently reviewed, revised, and approved by our editorial team.
How to Save on International Money Transfers: What Banks Don’t Tell You
How to Save on International Money Transfers
Normally, I’d question the secret fees that are hidden in my bank’s international money transfer services. While banks sometimes advertise low transfer fees, they usually do not mention the substantial exchange rate margins that quietly siphon money out of your funds. It shouldn’t be expensive to send money overseas.
I’ve discovered seven practical strategies anyone can use to save on international money transfers. Whether you’re sending a hundred dollars to a family member or paying for a service in a foreign country, these tactics will help you hold onto more of your hard-earned cash.
Don’t Swipe Until You Read This: The 7 Best Credit Cards for 2025 Ranked by Rewards
The 7 Best Credit Cards for 2025 Ranked by Rewards
There’s this moment that sticks with me—standing at a checkout line, swiping my old card like I always did, and thinking, “Wait… why am I not getting anything back for this?” I wasn’t traveling on points. I wasn’t getting cash back. I was just spending. Sound familiar?
Look, the truth is, credit cards can work for you—if you choose the right one. And in 2025, you’ve got some seriously rewarding options that can actually boost your bank account. From travel lovers to grocery haulers, there’s something for everyone.
Let’s break down the best credit cards out there this year—the ones that actually give back.
