Social Security COLA Forecasted at 2.7% for 2026, FRA and Tax Limits Update

The Social Security Administration (SSA) is set to announce the 2026 cost-of-living adjustment (COLA) for Social Security benefits in October 2025, with forecasts indicating a 2.7% increase. This predicted rise is slightly higher than the 2.5% COLA increase in 2025, reflecting inflationary pressures but remaining below the 2.9% inflation rate recorded between August 2024 and August 2025. Approximately 68 million Americans will see an average monthly benefit increase from $2,008 to about $2,062 under this adjustment.

The COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), specifically measuring price changes over the third quarters of consecutive years. This adjustment mechanism is vital to maintaining the purchasing power of Social Security benefits against inflation. The COLA percentage will officially be released on October 15, 2025, following updated CPI-W data for September 2025, with increased benefits taking effect in January 2026.

Apart from the COLA, notable changes to Social Security in 2026 include an increase in the full retirement age (FRA) to 67 years for those born in or after 1960, completing a gradual rise from age 65. The maximum taxable earnings limit for Social Security contributions is expected to rise to $183,600 in 2026, representing an increase from the previous year. Moreover, adjustments to the earnings test will allow beneficiaries to earn more income while collecting benefits before reaching full retirement age.

Social Security benefits have been subject to federal income taxation based on income thresholds, a policy in place since 1984. The taxability varies, with benefits fully untaxed below certain income levels and partially taxed at higher brackets. Although COLAs never reduce benefits—remaining static during deflationary periods—the three years without COLA adjustments since 1975 highlight instances of zero benefit growth.

These adjustments have important implications for financial planning, insurance professionals, and policymakers, as changes affect retirement income security, taxation, and labor market participation among seniors. The scheduled data releases and regulatory updates underscore the need for continuous monitoring of Social Security developments as they shape beneficiary financial outcomes and compliance requirements.