This Social Security Change Could Seriously Upend Your Finances in 2026

Key Points

When you’re retired, Social Security changes are definitely something you need to pay attention to. And there are a few positive ones happening this year.

For one thing, benefits are getting a 2.8% cost-of-living adjustment, or COLA. That’s a larger COLA than the 2.5% raise seniors on Social Security got in 2025.

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Social Security’s earnings-test limits are also rising. The earnings-test applies to people who collect benefits and earn money from a job before reaching their full retirement age. Higher earnings-test limits allows seniors to earn more money before risking having some of their Social Security withheld.

But there’s one Social Security change happening this year that isn’t necessarily a positive one. And while it may not be something for retirees to worry about, working Americans should take note.

Social Security’s wage cap is higher this year

Social Security gets most of its funding from payroll taxes. In fact, the way you qualify for benefits in retirement is by working and paying taxes on your wages during your career.

Each year, a cap is placed on the amount of income that’s subject to Social Security taxes. In 2025, earnings beyond $176,100 were exempt from Social Security taxes.

This year, however, that wage cap is rising to $184,500. And so people whose earnings are high enough to be impacted by this change will lose more money to Social Security taxes.

Now it can be argued that nobody should feel bad for higher earners who are affected by this year’s higher Social Security wage cap. And that may be true for people earning $3 million a year.

But it’s important to remember that in some parts of the U.S., a $184,500 salary doesn’t mean you’re living in luxury. You may, depending on housing costs, be barely getting by. People in that situation could see their finances seriously upended this year.

How to minimize the damage

If you’re someone who’s impacted by Social Security’s wage cap increase this year, there may be some steps you can take to help compensate.

First, you can try contributing more money to a traditional IRA or 401(k) plan. These accounts take your money on a pre-tax basis, allowing you to shield some income from taxes.

You can also manage your taxable investment accounts savvily to help make up for higher Social Security taxes. If you sell investments at a loss, for example, you can offset not only investment gains, but a limited amount of ordinary income each year.

There are other strategies you can use as well, so it could pay to talk to a tax professional if you’re worried about how this Social Security change will impact your finances.

Remember, Social Security’s wage cap tends to increase from year to year, so this is a problem you may find yourself dealing with frequently. Putting the right strategies in place could help you avoid a world of stress.

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