Contributed by: Kali Hassinger, CFP®, CSRIC™
It was recently announced that the Social Security benefits will receive a 2.8% Cost of Living Adjustment for 2026.
For the average retiree, this adjustment translates to an increase of approximately $56 per month, raising the average monthly benefit from $2,008 to $2,064. The COLA adjustment will be reflected in recipients’ January 2026 Social Security payment.
Why the COLA Matters
COLAs are designed to help Social Security benefits keep pace with inflation. They’re calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks the cost of everyday goods and services. However, this index doesn’t fully reflect the rising costs of essentials like healthcare, housing, and food, which tend to impact retirees more heavily.
Medicare Premiums
One key consideration is that Medicare Part B premiums are also increasing, projected to rise to $206.50 per month, which is a $21.50 increase from 2025. This means that while your Social Security check may be larger, a portion of that increase will be offset by higher healthcare costs.
Wage Base Increase: What It Means for Workers
For those still earning income, the Social Security wage base—the maximum amount of earnings subject to Social Security tax—will rise from $176,100 in 2025 to $184,500 in 2026, a 4.8% increase.
Tax Rate: The Social Security tax rate remains at 12.4%, split evenly between employer and employee (6.2% each).
Maximum Tax: This means the maximum Social Security tax per worker will increase by $1,041.60, totaling $22,878 in 2026.
This change affects higher-income earners and self-employed individuals, who should factor this into their tax planning and payroll budgeting.
Let’s Talk
If you’re wondering how these updates affect your personal situation—whether you're working, retired, or somewhere in between—we’re always here to help. Together, we can ensure your retirement plan is optimized for both income and tax efficiency.
Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.
This material is being provided for informational purposes only and is not a complete description. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making a decision, and it does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Any opinions are those of the author and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Prior to making a decision, please consult with your financial advisor about your individual situation.