Social Security 2026: Why 85% of Your $2,071 Monthly Benefit Could Be Taxable

"Social Security's 2.8% cost-of-living adjustment arrived in January checks for America's 71 million recipients, bringing the average monthly benefit to $2,071. While that $56 increase helps offset inflation, the adjustment alone won't determine your financial security in retirement. The critical decisions involve timing your claim strategically, managing how other income sources interact with your benefits, and building protections that last throughout retirement."

"The biggest surprise for many retirees is discovering Social Security benefits become taxable once other income enters the picture. Tax thresholds frozen since 1983 haven't kept pace with benefit growth, creating a trap where modest dividend income can suddenly make up to 85% of your benefits taxable. The calculation uses your combined income-adjusted gross income plus nontaxable interest plus half your Social Security."

"The claiming age decision creates permanent consequences that compound over decades. Anyone turning 62 in 2026 faces a stark choice: claim now and accept a 30% permanent reduction, wait until full retirement age at 67 for your standard benefit, or delay until 70 for a 24% boost above that baseline. Each year you wait between 62 and 70 increases your lifetime monthly payment, creating a powerful incentive to use other income sources early if you're healthy."

A 2.8% Social Security cost-of-living adjustment raised the average monthly benefit to $2,071, a $56 increase for recipients. Social Security benefits can become taxable once other income enters the picture because tax thresholds frozen since 1983 lag benefit growth. The taxable portion can reach up to 85% based on combined income calculations that include adjusted gross income, nontaxable interest, and half of Social Security. Claiming age is permanent: claiming at 62 reduces benefits by about 30%, full retirement age (67) yields standard benefits, and delaying to 70 increases benefits about 24%. Using other income early can enable delayed claiming and larger lifetime payments.

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