Social Security Changes for 2026

By Bruce D. Schobel

In the Public Interest, October 2025

Every October, the U.S. Social Security Administration (SSA) is required by law to announce certain changes in program amounts that occur automatically—that is, without any new legislation being necessary. The most widely publicized of these changes is the annual cost-of-living adjustment (COLA) affecting monthly Social Security benefits. Other automatic changes are important to people of working age as well as to beneficiaries. On Oct. 24, 2025 (delayed nine days due to the government shutdown), the government announced the Social Security COLA effective for December 2025 and other changes effective for 2026.

Cost-of-Living Benefit Increase

Since 1984, Social Security's COLAs have been based on the third-quarter-to-third-quarter increase, if any, in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W, which is computed by the U.S. Labor Department's Bureau of Labor Statistics, rose 2.8% (rounded to the nearest 0.1%) year-to-year from the third quarter of 2024 through the third quarter of 2025. Accordingly, all monthly Social Security benefits, in current-payment status or not, will rise by that same percentage, effective with benefits for December 2025. The 2.8% December 2025 COLA is larger than last year’s 2.5% COLA but still close to the 2.5% annual average for the past three decades, 1995–2024.

As usual, monthly benefits for December are paid the next month, in January. Monthly Social Security benefits are generally paid in arrears, after the month is over. Rare exceptions can occur if the scheduled payment date is a Saturday, Sunday or legal holiday, in which case the benefit is paid on the first preceding day that is not a Saturday, Sunday or legal holiday. Beneficiaries who have been on Social Security’s benefit rolls since before 1997 (or dually entitled to SSI benefits) usually are paid on the third of the month. Jan. 3, 2026, is a Saturday, so payments that would normally be made on the third will instead be made on Friday, Jan. 2. When Jan. 3 is a Sunday, then the December payment must be made on Dec. 31 (because in that case, Jan. 1 is a national holiday, and Jan. 2 is a Saturday). Since 1997, new beneficiaries are generally paid on the second, third or fourth Wednesday of the month, depending on their birthdate, so this end-of-month payment situation cannot occur for them.

Wage-Indexed Program Parameters

A long list of updated Social Security program parameters, some of which are rather obscure, is ordinarily announced simultaneously with the COLA each year. Unlike the COLA, which is based on very recent changes in the CPI, changes in these other parameters are based on the two-year lagged change in the national average wage. The Social Security Administration computes the national average wage figure from all W-2 forms filed by employers each year. (Note that employers are required to file employees’ W-2 forms with SSA, not the IRS, as most people assume.) Interestingly, workers who are self-employed, but not also employed by someone else, are excluded entirely from the national-average-wage computation. Workers who are both self-employed and employed during the year have only their earnings from employment included in the calculation of the national average wage, leading to some minor distortion in the resulting values and percentage changes. The national average wage rose from $66,621.80 in 2023 to $69,846.57 in 2024. That 2024 value, which is used by SSA to calculate the program’s wage-indexed parameters for 2026, is the most recent national average wage figure currently available. At the time of SSA’s October 2025 announcement, 2025 obviously wasn’t over yet, so the 2025 national average wage could not possibly be known then. It will be calculable in 2026, after employers file their 2025 W-2 forms with SSA. That takes several months, including correction of errors. After the 2025 national average wage is calculated, it will be used to determine Social Security’s wage-indexed program parameters for 2027.

Maximum Taxable Amount and Payroll Tax Rates

One very important change that affects higher-income workers (employees and the self-employed) is the increase in the maximum amount of earnings in the year that is (1) subject to Social Security payroll taxes (FICA and SECA) and (2) creditable for benefit-computation purposes. This program parameter can rise (it cannot fall) in any year following the effective date of a COLA. In a few recent years when no COLA was effective, due to the CPI-W declining over the applicable measuring period, the maximum taxable amount did not rise in the following year. Because a COLA is effective for December 2025, the maximum taxable amount will rise from $176,100 for 2025 to $184,500 for 2026, based on the percentage change in the national average wage from 2023 to 2024. The maximum taxable amount is always rounded to a multiple of $300 under the automatic-adjustment provisions of the Social Security Act.

Social Security tax rates are not automatically adjusted but are prescribed by the Social Security Act and Internal Revenue Code. The FICA tax rate, payable by employees and employers, each, has been 6.2% since 1990, ignoring the two-percentage-point payroll-tax reduction for employees only, enacted into law during 2011–12. The reduction in payroll taxes during those two years was totally replaced by an equal amount of general revenues, resulting in no financial effect on the Social Security program, positive or negative. The SECA tax rate payable by the self-employed is equal to the sum of the employee and employer FICA tax rates. The self-employed get to deduct, for income-tax purposes, the half representing the employer share. Employees cannot deduct Social Security taxes from their taxable incomes, but employers can. The tax treatment of SECA taxes is therefore consistent with the treatment of FICA taxes paid by employees and employers.

Retirement Earnings Test

Another wage-indexed Social Security program parameter is the exempt amount under the retirement earnings test for beneficiaries who have not yet reached their normal retirement age, or NRA. Social Security's NRA was 65 for workers born before 1938 and rose gradually according to a schedule in the Social Security Amendments of 1983 until it reached 67 for workers born after 1959, who first became eligible for retired-worker benefits in 2022 (when the oldest members of this group reached age 62). The annual exempt amount for beneficiaries who will not reach their NRA during the current calendar year will rise from $23,400 for 2025 to $24,480 for 2026. A special monthly test applies in the first calendar year of benefit entitlement only. For beneficiaries who reached their NRA in 2025, the exempt amount was $62,160 for earnings in the months prior to reaching NRA. That exempt amount will rise to $65,16 for 2026. Since January 2000, workers who have reached their Social Security NRA can earn unlimited amounts without causing any reduction in their Social Security benefits, starting with the month in which they reach that age. As always, additional covered earnings are taken into account for purposes of automatic annual benefit recomputations, which can cause monthly benefits to rise—recomputations cannot cause benefits to decline—effective each January after the previous year is over.

Coverage Credits

Certain wage-indexed program amounts are permitted by law to increase or even decrease with or without a COLA having occurred at the end of the previous year. The amount of earnings needed to receive one coverage credit was $1,810 in 2025 and will rise to $1,890 in 2026. Workers who earn at least $7,560 in Social Security-covered employment (or self-employment) during 2026 will receive the maximum four coverage credits for the year. Workers need 40 coverage credits to be eligible for retired-worker benefits at age 62 or older. These coverage credits used to be known as "quarters of coverage"; since 1978, they have been granted based on annual earnings, making the old name somewhat inappropriate.

Benefit Formulas

The so-called “bend-points” of the formulas used to compute primary insurance amounts (PIAs) and maximum family benefits (MFBs) are also wage-indexed and can increase or decrease with or without a COLA having occurred. The two PIA bend-points for workers first becoming eligible for benefits in 2026 (that is, born in 1964 with respect to retired-worker benefits) are $1,286 and $7,749. The three MFB bend-points for 2026 eligibilities are $1,643, $2,371 and $3,093.

The complete list of wage-indexed program parameters for 2026 and corresponding values for previous years are available at www.ssa.gov/oact.

Bruce D. Schobel, FSA, MAAA, is located in Winter Garden, Fla. He can be reached at bdschobel@aol.com.