Next year, Social Security benefits will see only a 2.8 percent increase—the second smallest cost-of-living adjustment since 2021. This is a stark reminder that while inflation remains in check, the financial realities for our retirees continue to tighten.
As of January, the average monthly benefit for retired workers will rise to approximately $2,071 from $2,015. This affects nearly 71 million Americans receiving retirement and disability payments, with an additional 7.5 million Supplemental Security Income beneficiaries seeing their adjustments at the end of this year. While any increase is welcome, let’s not kid ourselves; this is hardly the relief our seniors deserve.
The modest increase of 2.8 percent is slightly better than the 2.5 percent raise from this year, but it pales in comparison to the 8.7 percent spike we saw in 2023. The current inflation landscape is a stark contrast to the peaks we experienced during the pandemic, but that doesn’t mean retired Americans are in the clear.
Limited Relief for Retirees
Approximately 40 percent of Americans aged 65 and older depend on Social Security for at least half of their income. Economists warn that even slight inflation can significantly undermine the purchasing power of retirees. With many seniors relying on cash and bonds as their primary savings, any increase that doesn’t keep pace with the real cost of living translates to real losses.
To add insult to injury, next year’s benefit increase may be swallowed by a projected rise in Medicare Part B premiums—expected to jump about $21.50 to $206.50 a month. Premiums are deducted directly from Social Security checks, effectively neutralizing any benefit gains for many.
Tax and Trust Fund Changes
In 2026, the maximum amount of wages subject to Social Security payroll taxes will rise to $184,500—up from $176,100 this year. This increase is a small step in addressing an urgent issue.
However, Social Security’s trustees have issued a clarion call: the program’s combined trust funds could be depleted by 2034. Without action from Congress, tax revenue will only cover about 81 percent of promised benefits. This is an unsustainable path that can’t be ignored.
The administration touts the annual adjustment as a means to keep benefits aligned with economic conditions, aiming to shield retirees from losing purchasing power. But with increases dwindling annually, the message is clear: our seniors must not be neglected in this ongoing financial discussion.
