RETIREMENT RULES CHANGES FOR 2026

If you are in retirement or nearing retirement, it is important to keep up with changes to rules that affect your taxes and expenses. The rules change every year.

In 2026, several significant updates to Social Security, Medicare, retirement savings rules, taxes, and more will impact retirees and those nearing retirement.

These shifts can influence benefit amounts, healthcare costs, savings strategies, and tax obligations. Here's an overview of nine important differences for 2026.

Higher Retirement Savings Contribution Limits

The IRS has raised caps on contributions to help you build or maintain your nest egg.

For IRAs (traditional or Roth), the annual limit increases to $7,500 (up from $7,000 in 2025), with a catch-up contribution of $1,100 for those age 50 and older - allowing up to $8,600 total.

Workplace plans like 401(k)s, 403(b)s, and similar accounts see the employee deferral limit rise to $24,500 (up from $23,500). Catch-up rules vary:

Ages 50–59 or 64+: Additional $8,000 (total up to $32,500).

Ages 60–63: Additional $11,250 (total up to $35,750, if your plan allows the "super catch-up").

These higher limits provide more opportunity to save tax-advantaged dollars, especially if you're playing catch-up.

New Senior Tax Deduction for Many Retirees

A fresh provision from recent legislation offers up to $6,000 deducted from taxable income for individuals age 65 and older (at the end of 2025). This can reduce or eliminate taxes on Social Security benefits for qualifying people.

Eligibility: Full deduction for modified adjusted gross income (MAGI) up to $75,000 (single) or $150,000 (married filing jointly). It phases out gradually up to $175,000 (single) or $250,000 (joint) and disappears above those levels. This temporary break applies through the 2028 tax year.

Increased Standard Deduction Amounts

The standard deduction rises with inflation (plus an extra boost from legislation for prior years carrying forward). For 2026 tax returns:

Married filing jointly: $32,200.

Single or married filing separately: $16,100.

Head of household: $24,150.

For those 65+: Add an extra amount (around $2,000–$3,200 depending on status) on top of the base. This lowers taxable income for millions who don't itemize.

Social Security COLA Increase

Benefits rise by 2.8% starting with January 2026 payments (SSI recipients see it from late December 2025). The average monthly retirement benefit increases by about $56, from roughly $2,015 to $2,071. Survivor benefits see similar proportional boosts.

This adjustment reflects inflation trends from late 2024 to late 2025. While helpful, its real value depends on 2026 inflation—if prices rise faster, purchasing power could still feel squeezed.

Medicare Part B Premium and Deductible Hikes

The standard Part B premium (covering doctor visits and outpatient care) jumps nearly 10% to $202.90 monthly (up from $185). The annual Part B deductible rises to $283 (from $257).

Premiums deduct from Social Security checks for most, offsetting part of the COLA gain by about $18 monthly. Higher earners face income-related surcharges. Medicare Advantage and Part D averages may dip slightly, but the out-of-pocket prescription cap rises to $2,100.

Full Retirement Age Milestone

For those born in 1959 (reaching key ages in 2026), full retirement age (FRA) is 66 years and 10 months. For anyone born in 1960 or later, FRA settles at 67 permanently.

Claiming before FRA reduces benefits permanently; delaying past FRA (up to 70) increases them. This incremental rise from 1983 legislation is now fully in effect for newer retirees.

Updated Earnings Test Limits

If you claim benefits before FRA and keep working, earnings above certain thresholds temporarily reduce payments. In 2026:

Under FRA all year: Limit $24,480 ($1 withheld for every $2 over).

Reaching FRA in 2026: Limit $65,160 for pre-FRA months ($1 withheld for every $3 over).

Once you hit FRA, no reductions apply, and withheld amounts are recalculated into higher future benefits.

Penalty-Free Withdrawals for Long-Term Care Insurance

Under SECURE 2.0 rules (effective late 2025 onward), those under 59½ can withdraw up to $2,500 annually from IRAs, 401(k)s, etc., without the usual 10% early penalty to pay qualified long-term care insurance premiums. Withdrawals remain taxable as income. This supports planning for potential future care needs.

Higher Qualified Charitable Distribution Limit

If you're 70½ or older, you can make QCDs directly from an IRA to charity, excluding the amount from taxable income (up to $111,000 in 2026, up from $108,000). QCDs count toward required minimum distributions (starting at age 73) and avoid increasing taxable income—ideal for charitable-minded retirees.

These updates highlight the evolving retirement landscape in 2026. Review your situation, adjust savings or claiming strategies to maximize benefits and minimize costs.

Stay Disciplined My Friends,

Phil

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