Millions of Americans will see changes to Social Security next year, and beyond higher monthly retirement benefits, more wages will be subject to Social Security taxes.
The Social Security Administration announced that benefits will rise 3.6 percent in 2027 under the annual cost-of-living adjustment, or COLA.
Meanwhile, the maximum earnings subject to Social Security payroll taxes will rise from $184,500 in 2026 to $192,300 in 2027.
Other Social Security thresholds will also rise, including the amount beneficiaries below full retirement age can earn before some benefits are temporarily withheld.
Why It Matters
Social Security's yearly changes can affect both retirees' household budgets and how much working Americans pay into the program.
The 3.6 percent COLA applies to Social Security and Supplemental Security Income benefits, so nearly 72 million Social Security beneficiaries will receive the increase beginning with benefits payable in January.
Meanwhile, about 7.3 million SSI recipients will receive increased payments beginning December 31, 2026.
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The largest change for current retirees is the 3.6 percent COLA.
SSA calculates the adjustment using changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The agency said the CPI-W increased 3.6 percent from the third quarter of 2025 through the third quarter of 2026.
For retired workers, the estimated average monthly Social Security benefit will rise from $2,095 before the adjustment to $2,170 after it, 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, leaving many seniors wondering why their financial outlook isn’t improving despite receiving more money,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.
At the same time, higher earners could pay more Social Security payroll tax because a larger portion of their wages will fall under the program's taxable maximum.
“The bigger concern is that these annual adjustments highlight a Social Security system facing substantial financial pressures, and unless lawmakers address its long-term funding challenges, beneficiaries may find that the financial relief they receive in 2027 is overtaken by much larger uncertainty,” Beene said.
The maximum amount of earnings subject to Social Security's payroll tax will rise to $192,300 in 2027, up from $184,500 in 2026.
Employees pay a 6.2 percent Social Security tax on earnings up to that limit, with employers contributing another 6.2 percent. The Social Security portion is part of the combined 7.65 percent Social Security and Medicare payroll tax employees pay.
That means an employee earning at least $192,300 in Social Security-covered wages could pay up to $11,922.60 in Social Security payroll tax in 2027, compared with $11,439 on the 2026 maximum.
Another change will particularly affect Americans who claim retirement benefits before reaching full retirement age but remain in the workforce.
In 2027, Social Security beneficiaries under full retirement age for the entire year can earn $25,560 before the retirement earnings test begins withholding some benefits. That's 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. Social Security recalculates those benefits at full retirement age, but a bigger check years from now doesn't help pay today's bills,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
For people who reach 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, counting only earnings from the months before the worker reaches full retirement age.
Beginning with the month a beneficiary reaches full retirement age, the earnings limit no longer applies.
What Happens Next
Higher Social Security benefits will begin paying beneficiaries in January 2027, while SSI recipients will begin receiving increased payments on December 31, 2026.
However, Ryan said the question of how Medicare premiums will affect retirees still lingers.
“Until 2027 Part B premiums are finalized, many retirees won't know exactly how much of their COLA they'll actually take home,” Ryan said. “These are annual adjustments, not a solution to Social Security's much bigger funding problem.”
Contact Newsweek editors on this story: Jason Lemon and Sam Wilson.