Millions of Americans rely on Social Security payments in retirement—and two major updates could reshape how much seniors receive. With the One Big Beautiful Bill now law and a potential COLA increase coming in 2026, retirees need to review their income plans carefully.
What is the One Big Beautiful Bill?
The OBBB is a new federal law that offers an enhanced $6,000 tax deduction for individuals age 65 and older. This applies to both itemizers and non-itemizers, phasing out at $75,000 MAGI for single filers and $150,000 for married couples filing jointly.
Key takeaways:
- $6,000 deduction applies from now through 2028
- Deduction phases out at higher income thresholds
- Impacts retirees’ decisions on when to claim benefits
Financial planners are now revisiting plans with clients already receiving Social Security to determine whether their benefits or income levels put them at risk of phasing out the deduction.
COLA outlook: Will 2026 bring bigger Social Security payments?
In 2025, Social Security recipients received a 2.5% COLA, the lowest in recent years. However, new inflation data could signal a slightly higher COLA for 2026.
- Projected 2026 COLA: 2.6% (per the Senior Citizens League)
- Based on CPI-W inflation readings for Q3
- Final COLA decision expected October 2025
Although a 2.6% increase may offer modest relief, experts caution not to count on it for major financial change. Rising inflation can erode the actual buying power of any COLA increase.
How retirees can adjust their strategy
Financial advisers recommend retirees consider the following tactics to maximize the OBBB deduction and optimize Social Security benefits:
- Delay benefits: One spouse may delay filing to preserve the deduction threshold
- Use after-tax accounts: Drawing from non-retirement accounts can reduce MAGI
- Roth conversions: Rethink the timing to avoid income spikes
- Benefit comparison: Delaying Social Security to age 70 can increase monthly payments by up to 8% per year
For example, a couple with one spouse deferring benefits while the other files early may balance income and preserve deductions, especially if they expect long retirements or have family longevity.
If you’re nearing retirement or already receiving payments
If you’re 62 or older and weighing whether to take benefits now or later, timing matters more than ever:
- Full Retirement Age (FRA): 66–67 depending on birth year
- Early claiming (62) reduces monthly benefits
- Delaying until 70 can significantly increase lifetime income
Retirees should also be aware that the full Social Security benefit amount is counted when calculating MAGI—impacting OBBB eligibility.
What happens next?
The IRS and SSA are expected to issue further guidance on how the OBBB deduction interacts with benefit claiming and taxable income in retirement. In the meantime:
- Review your income sources with a financial adviser
- Create or update your SSA account to verify your benefit schedule
- Consider tax-efficient withdrawal strategies to preserve deductions
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