To paraphrase the lyrics of an old song—Social Security, it is a-changin’. In fact, it changes every year. 2026 is no different. There are six major changes you need to know about and prepare for.

 

The Social Security cost-of-living adjustment (COLA) is going up

Since 1975, Social Security has adjusted beneficiary payouts every year with a cost-of-living adjustment (COLA) which is supposed to keep recipients even with inflation, although it rarely does.  In 2026, the COLA goes up by 2.8% which will increase the average Social Security check by $56/month. But the 2026 Medicare Part B premium is going up by $21.50.

 

Average Social Security increase for 2026              $56.00

Medicare Part B premium increase                  -21.50

_____

REMANING:                                                            $34.50

 

That means the increase in Medicare premiums will eat up almost 40% of the cost-of-living adjustment for the average Social Security recipient.

 

Full retirement age (FRA) goes up in 2026

For years the accepted Social Security retirement age was 65. But there were worries that the long-term financial stability of Social Security would be negatively affected because Americans were living longer. So, in 1983, the Social Security Act was amended, initiating a gradual, 43-year process of increasing the full retirement age (FRA) from 65 to 67. The change affected individuals born in 1938 and later, with the full retirement age now fixed at 67 for those born in 1960 or later.

 

The process is almost complete:

  • If you were born in 1960 or later, your FRA is age 67 and will be reached starting in November 2026 and after.
  • If you were born in 1959, your FRA is age 66 and 10 months and is reached starting in November 2025 and after.
  • If you were born in 1958, your FRA is age 66 and six months, and was reached in November 2024 and after.

 

Claiming before full retirement age

Full retirement age (FRA) is when you get 100% of your Social Security benefit. You can claim your benefit as early as 62, but if you do, the Social Security Administration hits you with a permanent early withdrawal penalty. Your payment will be reduced by 5/9 of 1% for each month before normal retirement age, up to 36 months. It will be reduced by 5/12 of 1% for each month that exceeds 36 months.

 

Claiming after full retirement age

If you decide to continue working beyond your full retirement age and delay applying for Social Security, you can increase the amount you receive in two ways:

  • Your benefit is based on your highest 35 years of earnings. For each additional year you work and earn more than in a previous lower earning year, your benefit increases because the total of those 35 highest earning years went up.
  • If you wait to start Social Security past your full retirement age, the SSA gives you delayed credits, which is a bonus for waiting. Your monthly check will increase every month you wait up to age 70. The bonus is 2/3 of 1% for each month you delay past your FRA. The delayed credits stop at age 70, so there’s no reason to wait past that age to begin collecting your benefit.

 

Social Security tax limit

Every year the SSA sets a maximum income level that you have to pay Social Security taxes on. That number goes up every year based on inflation. In 2026, the wage cap for Social Security taxes will increase to $184,500, up $8,400 from $176,100 in 2025. In dollars that means a person earning $184,500 will have $11,439 deducted from their pay check.

 

Even though Social Security will stop withholding taxes once you reach the income cap, there is no cap on Medicare taxes, meaning your total wages are subject to the 1.45% tax.

 

Annual earnings test

If you decide to begin Social Security before your full retirement age and continuing working, the SSA applies the annual earnings test. In effect, if you earn more than the SSA thinks you should, they take back part of your benefit. For every $2 you earn above the annual threshold, SSA takes back a dollar of your Social Security check.

 

In 2026, the threshold is $24,480 ($2,040 a month), up from $23,400 ($1,950 a month) in 2025.

 

The numbers are better if you reach FRA in 2026. If that case you only give up $1 in benefits for every $3 you earn above an earnings cap of $65,160.

 

But here’s the good news. Once you reach your full retirement age, the annual earnings test goes away and you can earn all you want without SSA pulling back any of your benefit.

 

Earning Social Security credits in 2026

To receive a Social Security benefit, you must have worked a minimum of 40 calendar quarters at a job where you pay Social Security taxes. (Those quarters do not have to be consecutive). For each quarter you work you receive one credit.

 

The number of credits is used to determine your eligibility for retirement or disability benefits, Medicare, and your family’s eligibility for survivor benefits.

 

To earn one credit in 2026, you must have wages or self-employment income of at least $1,890 for the quarter, and you must earn $7,560 to get four full credits. In 2025, you only needed to earn $1,810 to earn a credit.

 

Once you earn the 40 credits, earning more credits won’t increase your benefit payment. Your benefit is based on your 35 highest earning years.

 

The Social Security Trust Fund will be seven years away from facing insolvency

The Social Security Trust Fund is in trouble. Officials and politicians have known there was a problem for decades. Here’s a quote from a 2002 Social Security statement:

In 2017, we will begin paying more in benefits than we collect in taxes. By 2041, the trust funds will be exhausted and the payroll taxes collected will be enough to pay only about 73% of benefits owed. We’ll need to resolve long-range financial issues to make sure Social Security will provide a foundation of protection for future generations as it has done in the past.

Things have gotten worse since 2002. Now, the Social Security Board of Trustees says the coffers will be empty by 2033. This is not just bad news for people who receive a Social Security benefit, but for the generations behind them. A substantial decrease in benefits would require future beneficiaries to save almost $150,000 to cover the shortfall; Gen X retirees would need to save an additional $701 a month. The longer the issue is ignored, the more drastic the solutions will have to be.

 

While trust fund insolvency won’t happen in 2026, it needs to be factored into every financial plan. If you haven’t reviewed your plan for a while or if you don’t have a financial plan at all, the Certified Financial Planners at Alhambra Investments can help. Contact us at info@alhambrapartners.com.

 

 

Disclaimer:

This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors; all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investments at 1-888-777-0970 or email us at info@alhambrapartners.com.