As the new year approaches, millions of Americans relying on Social Security are preparing for significant updates that will directly affect their benefits. These yearly adjustments are designed to protect retirees, disabled workers and survivors from inflation, while ensuring the program keeps pace with changes in national wage levels.
However, new surveys from two respected institutions suggest that many Americans still misunderstand how Social Security works. A recent study by T. Rowe Price found widespread confusion about inflation adjustments, while another by the Nationwide Retirement Institute revealed major misconceptions about earning limits and maximum benefit caps.
Here is a clear breakdown of the three biggest Social Security changes arriving in January 2026 and why they matter for your financial planning.
1. Benefits Will Rise by 2.8 Percent to Offset Inflation
A surprising number of Americans still believe that Social Security payments stay the same year after year. In the T. Rowe Price survey of 3,005 adults, one-third of people aged 50 to 61 mistakenly thought benefits do not adjust with inflation.
In reality, Social Security includes an annual cost-of-living adjustment, better known as COLA, that protects the buying power of beneficiaries. This increase is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation across the third quarter of the year.
Because the CPI-W rose 2.8 percent from July through September 2025, all Social Security payments will increase by the same percentage starting January 2026.
Below is how the 2.8 percent COLA affects average monthly payments:
| Beneficiary Type | Avg. Monthly Benefit Before COLA | Avg. Monthly Benefit After COLA | Increase |
|---|---|---|---|
| Retired Workers | $2,010 | $2,066 | $56 |
| Spouses | $955 | $982 | $27 |
| Survivors | $1,576 | $1,620 | $44 |
| Disabled Workers | $1,584 | $1,628 | $44 |
These increases will be reflected in the official COLA notice mailed by the Social Security Administration (SSA) in December. Beneficiaries can also view updated details in their my Social Security online account on the SSA website.
2. Maximum Social Security Benefits Will Rise Due to Higher Wage Indexing
Another widespread misunderstanding revealed by the Nationwide Retirement Institute survey is the belief that there is no limit to how much a person can receive from Social Security. In reality, benefits are capped because they are calculated based on lifetime taxable earnings.
Social Security only counts income subject to payroll tax, up to a legally set annual limit. In 2025, that limit is $176,100. Any earnings above that threshold are not taxed for Social Security and do not increase a worker’s benefit calculation.
Because the earnings cap adjusts upward as national wages grow, the maximum potential benefit also increases each year.
For 2026, here is the highest possible monthly benefit depending on the age you begin claiming:
| Claiming Age | Maximum Monthly Benefit in 2026 |
|---|---|
| 62 | $2,969 |
| 65 | $3,467 |
| 67 | $4,207 |
| 70 | $5,181 |
Workers who delay retirement until age 70 will continue to receive the largest possible check.
3. Early Claimants Will Be Allowed to Earn More Before Benefits Are Withheld
A third misconception highlighted by the Nationwide survey is that workers can collect Social Security early without affecting their benefits. The truth is more nuanced.
If you begin collecting Social Security before full retirement age (FRA) and you continue working, some of your benefits may be temporarily withheld if your earnings exceed the Retirement Earnings Test (RET) limits.
These limits increase annually with wage growth. For 2026, the updated RET thresholds are:
- Lower Earnings Limit: $24,480
Beneficiaries who will not reach full retirement age in 2026 will have $1 withheld for every $2 earned above this amount. - Higher Earnings Limit: $65,160
Beneficiaries who will reach full retirement age in 2026 will have $1 withheld for every $3 earned above this amount.
While this may sound concerning, the withheld benefits are not lost permanently. Once you reach full retirement age, the SSA recalculates your payment so that much of the withheld money is gradually returned over your lifetime. The Social Security Administration explains this process clearly on its official site.
What These Changes Mean for the Average American
The 2026 updates reflect three ongoing realities:
- Inflation continues to influence household budgets.
- Rising wages expand the framework used to calculate benefits.
- Early retirement still comes with earnings-based limitations.
Understanding these factors is essential for planning when to retire, how long to work and how much income to expect each year. Social Security remains a cornerstone of retirement income for millions, and staying informed ensures you get the full value of the benefits you’ve earned.
For deeper insight into retirement planning, consumers can review guidance from trusted sources such as the U.S. Department of Labor on retirement security and planning strategies.
