Major changes to Social Security are taking place this year. These updates affect when you can claim full benefits, how much your monthly checks have increased due to inflation, and how much of your income is taxed.
Understanding these shifts can help you make smarter financial decisions and avoid costly money mistakes. Learn what’s changing, why it matters, and how to prepare yourself financially.
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1. Full retirement age rises to 67
This year, the full retirement age (FRA) for Social Security has been pushed to 67. This will affect those born in 1960 or later, completing the gradual rise that began with the 1983 reforms. The age has moved from 65 to 66 and beyond. If you turn 66 this year, you must wait an extra year for full benefits.
While the increase may seem small, the financial impact is notable. Full retirement age sets your monthly benefit, and claiming early will cause permanent reductions. Starting benefits at 62, now five years early, will mean about a 30% cut compared to waiting until 67. Reductions are based on how many months before full retirement you claim, so a higher FRA increases the early penalty.
Delaying benefits past 67 still raises monthly payments through delayed retirement credits, up to age 70. That incentive remains, offering an 8% increase each year you wait. For many, the change makes claiming age more important. Retiring at 66 in 2026 will be one year early, not full. Those planning to retire in their mid-sixties may need to adjust their timelines or supplement their income with other sources.
Social Security’s retirement calculator highlights how timing affects benefits. The higher full retirement age moves the goalposts, so near-retirees should recalculate. With rising longevity and health care costs, early claiming can significantly reduce lifetime income. Planning for this change now is critical to avoid surprises.
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2. Cost‑of‑living adjustment
Another big change for this year is the annual cost‑of‑living adjustment (COLA), which is 2.8%. This is based on inflation data and the Consumer Price Index (CPI-W), which sets COLAs.
The COLA often fails to keep pace with real-life inflation, especially as Medicare premiums, which are deducted from Social Security checks, frequently rise as well. The standard monthly Medicare Part B premium has increased to $202.90 this year, a $17.90 price hike, which makes it harder to keep more cash in your wallet.
For those relying on Social Security, it’s important to see how this plays into your overall budget.
3. Wage base limit increase
The third change this year affects workers, especially those with higher incomes. The Social Security wage base has risen from $176,100 in 2025 to $184,500 this year. Income above this will not be taxed for Social Security, but will still be subject to Medicare tax.
For high earners, this change means a larger share of income will be taxed, increasing the total amount paid into the system. While this also slightly boosts future benefit calculations by including more earnings in the formula, the immediate effect is a higher tax bill for both employees and employers alike. A worker earning above the current cap will see hundreds of dollars in additional payroll tax withholding this year.
This adjustment is automatic, reflecting national wage growth as average wages rise. The substantial jump from 2025 to 2026 represents Social Security’s ongoing adaptation to economic trends, potentially affecting take-home pay just as some ramp up retirement savings.
Review your pay stub, update withholding estimates, and reconsider your retirement savings to offset the higher tax. If you’re self-employed, remember you pay both employee and employer shares of Social Security tax, increasing the impact.
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Bottom line
Expect smaller benefits if you claim early due to a higher full retirement age, only a modest increase from COLA, and more Social Security tax owed due to a higher wage cap. All together, these changes mean that it’s more important than ever to pay attention to higher medical costs, stricter budgets, and increased taxes.
For those approaching retirement, reevaluate your claiming strategy, recalculate projected benefits under the updated rules, and adjust your savings as needed. For those still working, especially at higher income levels, account for increased payroll taxes in this year’s budget.
Understanding these changes and making informed decisions about claiming benefits, savings, and budgeting can help secure your retirement plan.
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