For millions of Americans approaching or enjoying retirement, 2026 brings a wave of financial adjustments that will reshape monthly budgets and long-term planning strategies.
From Social Security payment increases to expanded retirement savings opportunities and a significant new tax break for seniors, AARP has identified several key changes that retirees and workers need to understand now.
The shifts reflect ongoing efforts to help older Americans keep pace with inflation while encouraging greater retirement savings. However, rising Medicare costs and complex new tax provisions mean that the net impact will vary considerably depending on individual circumstances.
Inflation boost brings modest relief
Social Security beneficiaries will see their payments increase by 2.8 percent in January 2026, when the new cost-of-living adjustment takes effect. The Social Security Administration estimates that the average monthly retirement check will climb by approximately $56, moving from $2,015 to $2,071. Survivor benefits for widowed spouses will also increase, with the average payment rising from $1,867 to $1,919, a $52 boost.
This adjustment reflects changes in consumer prices measured between the third quarter of 2024 and the third quarter of 2025. Inflation ticked upward during that period, resulting in a slightly larger increase compared with 2025’s 2.5 percent adjustment.
The impact on beneficiaries’ purchasing power will largely depend on inflation trends throughout 2026. If inflation cools, the 2.8 percent benefit increase could provide retirees with a modest financial cushion. However, if prices continue to climb, the adjustment may leave beneficiaries struggling to manage their expenses.
People collecting retirement, family, survivor, or Social Security Disability Insurance benefits saw the increase reflected in their January payments.
Those receiving Supplemental Security Income, a program for adults 65 and older as well as people who are blind or have a disability and have very limited income and resources, received their first inflation-adjusted payment on December 31.
Medicare costs offset Social Security gains
The monthly premium for Medicare Part B enrollees will be $202.90 for 2026, an increase of $17.90 from $185.00 in 2025.
Most Medicare enrollees’ premiums are deducted directly from their Social Security payments, meaning the Part B increase effectively reduces their cost-of-living adjustment by $17.90 a month.
Premiums are higher for what Medicare considers high earners, defined in 2026 as beneficiaries with incomes above $109,000 for individual taxpayers and $218,000 for couples filing jointly. The annual deductible for Part B is also rising, from $257 in 2025 to $283 in 2026.
People with Medicare Advantage coverage or Medicare Part D prescription drug plans may see varying costs, as these plans are provided by private insurers.
According to Medicare estimates, the average monthly premium for a Medicare Advantage plan will decline by $2.40 a month, from $16.40 in 2025 to $14.00 in 2026. The average premium for a stand-alone Part D prescription plan is projected to be $34.50 next year, a reduction of $3.81 from 2025.
Retirement savings limits climb higher
Thanks to recent adjustments by the Internal Revenue Service, workers can build their retirement savings even bigger in 2026.
Savers under age 50 can contribute as much as $24,500 to a 401(k) in 2026, an increase from the $23,500 limit in 2025. For most workers 50 and older, the standard catch-up allowance rises to $8,000, up from $7,500, bringing their total possible contribution to $32,500.
People who are 60, 61, 62, or 63 qualify for an even larger catch-up amount. They can contribute an extra $11,250 to their workplace plan, allowing for a maximum of $35,750.
This enhanced catch-up tier stems from the SECURE 2.0 Act, a 2022 law aimed at strengthening retirement savings. These limits apply to other retirement plans as well, such as 403(b) plans for employees of public schools and some nonprofit organizations, 457(b) plans offered by some state and local governments and nonprofits, and the federal government’s Thrift Savings Plan.
For individual retirement accounts, the general contribution limit is $7,500 in 2026, an increase from $7,000 in 2025. The catch-up contribution for people 50 and older rises from $1,000 to $1,100, allowing a total of up to $8,600 in 2026. Contributions for the 2025 tax year can still be made until April 15, 2026.
A new tax break for seniors arrives
Along with higher contribution limits, the One Big Beautiful Bill included a new tax break of up to $6,000 for people age 65 and older that could reduce or fully offset taxes on Social Security income for millions of Americans. The provision applies to people who are at least 65 at the end of 2025.
Qualifying individual taxpayers with a modified adjusted gross income of up to $75,000, and spouses filing jointly with a combined income of up to $150,000, can deduct up to $6,000 each from their taxable income. The deduction is reduced at higher income levels, up to $175,000 for single filers and $250,000 for couples.
This new deduction is in addition to the current additional standard deduction for seniors under existing law. The deduction is available for both itemizing and non-itemizing taxpayers.
When combined with the standard deduction and existing senior deduction, eligible seniors filing individually can deduct up to $23,750, while married couples filing jointly can write off up to $46,700. The provision is temporary and will expire after the 2028 tax year.
According to estimates, 88 percent of all seniors receiving Social Security income will benefit from this new deduction. For many, the increased deduction amount will more than cover their taxable Social Security benefits, effectively eliminating federal taxes on those benefits.
However, the law did not eliminate federal taxes on Social Security entirely, and eight states continue to tax Social Security to varying degrees.
Work limits increase for early claimers
Claiming Social Security retirement benefits before full retirement age can lead to a temporary reduction in payments if yearly work income exceeds a set limit.
For individuals who will reach full retirement age after 2026, the earnings limit for 2026 is $24,480, up from $23,400 in 2025. Social Security withholds $1 in benefits for every $2 earned above that amount.
For those who will reach full retirement age during 2026, the higher earnings limit is $65,160, up from $62,160. In this case, the reduction is smaller: $1 withheld for every $3 earned over the limit. After reaching full retirement age, the earnings test no longer applies, and beneficiaries receive their full monthly benefit regardless of work income.
What it means for retirees
These increases come at a critical time for retirement savers. As pensions become less common, especially in the private sector, most workers will rely on the proceeds of their retirement savings, plus Social Security, for the bulk of their retirement income.
The share of private-sector workers with a traditional pension plan has fallen by half over the past 30 years, from 28 percent in 1995 to 14 percent in 2025, according to data from the U.S. Bureau of Labor Statistics.
For many Americans, retirement continues to be a stage of life where routines, financial priorities, and personal expectations evolve long after they have finished full-time work. With major adjustments on the horizon in 2026, including changes to Medicare costs, Social Security benefits, and the way money is managed, staying informed becomes essential.
The combination of modest benefit increases, higher contribution limits, and new tax breaks creates both opportunities and challenges for those planning their retirement years.
