9 Ways Retirement Will Be Different in 2026

How changes to Social Security, Medicare, 401(k) contributions and more will affect your finances

Cameron Huddleston and Deirdre Shesgreen,

AARP

Comments

Published December 17, 2025

under an umbrella, a retiree relaxes in a lounge chair, which sits on top of a weatervane to represent the shifting winds of retirement finances

Glenn Harvey

Retirement may seem like the most stable period of your life, with no work demands, no kids to cart around and lots of free time. But this dynamic new chapter comes with its own twists and turns. Your lifestyle, expectations and finances continue to change. And in 2026, big shifts are coming — from Social Security payments and Medicare expenses to how you save and spend.

Even if retirement is still a few years away, these changes could affect how you prepare to leave the 9-to-5. Here are nine things affecting retirees’ financial well-being that will be different in the coming year.

1. Social Security gets COLA boost

Social Security recipients get a 2.8 percent benefit bump in January, when the annual cost-of-living adjustment (COLA) kicks in. The average monthly retirement payment is set to increase by an estimated $56, from $2,015 to $2,071, according to the Social Security Administration (SSA), and the average survivor benefit for a widowed spouse will rise by $52, from $1,867 to $1,919.

The 2026 COLA reflects changes in prices for a set of consumer goods and services from the third quarter of 2024 to the third quarter of 2025, as measured by a federal price index. Inflation ticked up over that time, resulting in a slightly higher increase compared with 2025’s 2.5 percent COLA.

People collecting retirement, family, survivor or Social Security Disability Insurance (SSDI) benefits will see the COLA boost in their January payments. Those receiving Supplemental Security Income (SSI) — a benefit for people with very limited income and assets who are 65 and older, blind or have a disability that is administered by the SSA — will get their first inflation-adjusted payment on Dec. 31.

The COLA’s impact on beneficiaries’ purchasing power will depend largely on inflation trends in 2026. If inflation cools, the 2.8 percent benefit increase could provide retirees with a modest financial cushion. But if prices continue to climb, the COLA may leave beneficiaries struggling to manage their expenses.

2. Medicare premiums up nearly 10%

One cost that will put a dent in the COLA: Medicare premiums. The base rate for Medicare Part B, which covers doctor visits and other outpatient care, is going up by 9.7 percent in 2026, from $185 to $202.90 a month.

Most Medicare enrollees’ premiums are deducted directly from their Social Security payments, so the Part B increase effectively reduces their COLA by $17.90 a month. Premiums are higher for what Medicare considers high earners — in 2026, those are beneficiaries with incomes above $109,000 for individual taxpayers and $218,000 for couples filing jointly.

The annual deductible for Part B is also rising, from $257 in 2025 to $283 in 2026.

People with Medicare Advantage (MA) coverage or Medicare Part D prescription drug plans may see varying costs, as these plans are provided by private insurers. According to Medicare estimates, the average monthly premium for an MA plan will decline by $2.40 a month, from $16.40 in 2025 to $14.00 in 2026.

The average premium for a stand-alone Part D prescription plan is projected to be $34.50 next year, a reduction of $3.81 from 2025. The cap on annual out-of-pocket costs for prescriptions under both Part D policies and drug coverage in MA plans will increase from $2,000 to $2,100.

3. Retirement plan contribution caps rise

The IRS sets annual limits on the amount you can put into an individual retirement account (IRA) or workplace retirement plan, with multiple tiers.

For IRAs, the standard contribution cap for the 2026 tax year is $7,500, up from $7,000 in 2025. The maximum catch-up contribution for savers age 50 and older is going up from $1,000 to $1,100, meaning older adults can sock away up to $8,600 in an IRA in 2026. (You can still make a contribution that counts for 2025 tax purposes — the deadline is April 15, 2026.)

If you have a job-based retirement account, such as a 401(k), 403(b) or Thrift Savings Plan, the 2026 contribution limit for workers age 49 and younger is $24,500, $1,000 more than the 2025 cap. For workplace plans, there are two catch-up levels:

Workers ages 50 to 59 and 64-plus have a catch-up cap of $8,000 in 2026 (up from $7,500 in 2025), for a maximum contribution of $32,500.
The so-called “super catch-up” limit for workers ages 60 to 63 is $11,250 (the same as in 2025), for a total contribution cap of $35,750.

4. Standard tax deduction going up

The IRS increases the standard deduction most years to account for inflation, and this year, Congress juiced it a bit more as part of the “One Big Beautiful Bill” (OBBB) enacted in July. That’s especially meaningful for Americans age 65 and over, who have a bigger standard deduction than younger taxpayers do.

Here are the regular standard deductions for 2025 tax returns (the ones you must file by April 15, 2026):

Married couple filing jointly: $31,500 (up from $29,200 in the 2024 tax year)
Single or married filing separately: $15,750 (up from $14,600)
Head of household: $23,625 (up from $21,900)

And here are the standard deductions for taxpayers age 65-plus:

Married filing jointly (if one or both spouses are 65-plus): $34,700 (up from $32,300 in 2024)
Single or married filing separately: $17,750 (up from $16,550)
Head of household: $25,625 (up from $23,850)

5. Many retirees get a new tax break

Along with the higher standard deduction, the OBBB included a brand-new tax break of up to $6,000 for people age 65 and older that could reduce or fully offset taxes on Social Security income for millions of Americans.

The provision, which AARP supported including in the OBBB, applies to people who are at least 65 at the end of 2025. Qualifying individual taxpayers with a modified adjusted gross income (MAGI) of up to $75,000, and spouses filing jointly with a combined MAGI of up to $150,000, can deduct up to $6,000 each from their taxable income.

The deduction is reduced at higher income levels, up to $175,000 for single filers and $250,000 for couples. Above those thresholds, you are not eligible. It is also temporary — under the OBBB, it is scheduled to sunset after the 2028 tax year.

6. Full retirement age changes

Under a law Congress passed in 1983, full retirement age (FRA) for Social Security — the age at which you become eligible to claim 100 percent of the retirement benefit calculated from your lifetime earnings — has been going up incrementally from 65 to 67, based on year of birth. That drawn-out change is nearly complete.

FRA will settle at 67 for people born in 1960 and after, but for those born in 1959, it’s 66 and 10 months. You’ll reach it in 2026 if you were born from March 2, 1959, through Jan. 1, 1960.

7. Social Security ‘earnings test’ adjusted

If you claim Social Security retirement benefits before reaching full retirement age and continue to work, your payments may be temporarily reduced — but only if your annual work income exceeds a certain cap. Here’s how this earnings test works in 2026:

If you will reach FRA in a future year, the 2026 earnings limit is $24,480 (up from $23,400 in 2025). Social Security withholds $1 in benefits for every $2 in earnings above the cap.
If you will reach FRA in 2026, the threshold is $65,160 (up from $62,160). The withholding in this case is less: $1 in benefits for every $3 in earnings above the limit.

Once you hit full retirement age, the earnings test goes away. You will receive the full monthly payment you’re eligible for, with no deduction for work income, and the SSA recalculates your benefit amount to make up for the past withholding.

8. Penalty-free withdrawals for long-term care insurance

Taking money out of a retirement savings plan typically carries a 10 percent penalty if you’re younger than 59½. Starting Dec. 29, 2025, there’s an exception for withdrawals made to pay for long-term care insurance.

Under a provision of the SECURE 2.0 Act, a 2022 federal law designed to promote retirement readiness, savers under 59½ can pull up to $2,500 per year from IRAs, 401(k)s and other retirement plans without penalty to cover premiums for a “high-quality” long-term care policy. (The withdrawals are still subject to regular income taxes.) Check with your insurance provider to see if your policy qualifies under the law.

9. New qualified charitable donations limits

The IRS allows people age 70½ and older to make a qualified charitable donation (QCD) directly from an IRA and exclude it from their taxable income. The ceiling for an eligible donation is increasing from $108,000 in the 2025 tax year to $111,000 in 2026.

Along with reducing your tax bill, such donations count toward the required minimum distributions (RMD) you must take from a traditional IRA starting at age 73. If you take your mandatory withdrawal in the form of a QCD, it’s tax-free, provided you make the donation directly from your IRA to the charity. You don’t have to itemize to claim a QCD, as you do if you’re taking 2025 charitable donations as regular tax deductions.

AARP Foundation Tax-Aide, a free tax-prep service staffed by IRS-certified volunteers, can help you with QCDs and other issues on your 2025 return.

%{postComment}%

Cameron Huddleston is an award-winning personal finance journalist and author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. Her work has appeared in Kiplinger.com, Kiplinger's Personal Finance, Forbes Advisor, Chicago Tribune, Business Insider and many more online and print publications.

Deirdre Shesgreen is an AARP writer and editor covering Social Security. She previously worked as a state news editor for the AARP Bulletin and as a reporter and editor at USA Today, the St. Louis Post-Dispatch and other publications.