Millions of Americans will experience changes in Social Security next year. Beyond higher monthly retirement benefits, more wages will be subject to Social Security taxes.
COLA Increase
The Social Security Administration announced that benefits will rise 3.6% in 2027 under the annual cost-of-living adjustment (COLA). This affects nearly 72 million Social Security beneficiaries and 7.3 million Supplemental Security Income (SSI) recipients. The changes start in January for Social Security and December 31, 2026, for SSI.
The largest change for current retirees is the 3.6% COLA. The adjustment uses changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). From the third quarter of 2025 to the third quarter of 2026, the CPI-W increased 3.6%. Retirees will see an average monthly benefit rise from $2,095 to $2,170, an increase of about $75 per month.
“Rising Medicare premiums, health care expenses, and everyday living costs could quickly take up much of that increase,” said Alex Beene, a financial literacy instructor.
Tax Changes
The maximum earnings subject to Social Security payroll taxes will increase from $184,500 in 2026 to $192,300 in 2027. Employees pay a 6.2% Social Security tax on earnings up to this limit, with employers contributing another 6.2%. This is part of the combined 7.65% Social Security and Medicare payroll tax employees pay.
An employee earning at least $192,300 in 2027 could pay up to $11,922.60 in Social Security payroll tax, compared with $11,439 in 2026.
“The bigger concern is that these annual adjustments highlight a Social Security system facing substantial financial pressures,” Beene noted.
Impact on Early Retirees
Americans claiming retirement benefits before reaching full retirement age but remaining in the workforce will see changes. In 2027, beneficiaries under full retirement age can earn $25,560 before some benefits are temporarily withheld. This is up from $24,480 in 2026. SSA withholds $1 in benefits for every $2 earned above that threshold.
“That’s welcome breathing room, but earn too much, and benefits can still be withheld,” commented finance expert Michael Ryan.
For those reaching full retirement age during 2027, the limit rises to $67,920, up from $65,160 in 2026. SSA withholds $1 for every $3 earned above that limit, only counting earnings before reaching full retirement age. After reaching full retirement age, the earnings limit no longer applies.
Future Considerations
Higher Social Security benefits will begin in January 2027, while increased SSI payments start on December 31, 2026. However, questions about Medicare premiums remain.
“Until 2027 Part B premiums are finalized, many retirees won’t know exactly how much of their COLA they’ll take home,” Ryan said. “These are annual adjustments, not a solution to Social Security’s bigger funding problem.”