The Social Security safety net just sprung a leak – and it could cost millions of retirees thousands per year. A new proposal from the Committee for a Responsible Federal Budget (CRFB) would cap COLA increases for high earners, stripping full inflation protection from the top 25% of beneficiaries starting in 2026. While the 2.8% COLA is still locked in for everyone in January (adding $56/month average), this cap would limit future boosts to just $950/year for those with larger checks – a permanent $200–$1,400 annual hit for lifetime high earners. The goal? Save $115 billion over 10 years and delay the program’s 2032 insolvency by years. But at what cost to seniors who paid in for decades? Here’s your complete breakdown of the proposal, who it targets, and what to do before Congress potentially votes in spring 2026.
The New Proposal: Full COLA Only Up to $33,000 in Benefits
Under CRFB’s “Trust Fund Solutions Initiative,” COLA adjustments would apply fully to the first $33,000 of your annual benefit (twice the poverty level, about $2,750/month), but zero above that. For 2026’s 2.8% COLA, a typical retiree with $24,000/year ($2,000/month) gets the full $672 boost ($56/month). But a higher earner with $49,400/year ($4,117/month) sees only $950 ($79/month) instead of $1,383 ($115/month) – a $433 loss that year, compounding forever.
This “progressive cap” at the 75th percentile saves $115 billion/decade, closing 10% of the solvency gap. A 50th percentile cap saves $385B (25% gap); 90th saves $35B (2% gap). It affects benefits tied to 35 highest-earning years – no cuts to SSI/SSDI low-income, but doctors, execs, and professionals feel the pinch.
Who Gets Capped? Millions of High Earners in the Crosshairs
The proposal hits the top 25% of beneficiaries (about 17 million people) with above-median benefits ($24,852/year average in 2026). Full COLA if:
- Benefits under $33,000/year (90% safe – typical FRA retiree gets $850 untouched).
- SSI/SSDI low-income (max $969/month – full 2.8% always).
Capped if:
- Benefits over $33,000 (top 25%: $1,150+ COLA cut to $950 – $200/year loss).
- Early claimers (age 62): Cap reduced 30% further.
- High lifetime earners ($80K+ average): Lose $1,000–$1,400/year ongoing.
Couples where both worked high-wage jobs? Double hit. No retroactive – starts 2026.
Real Impact on Your Check: 2026 Numbers
Average retiree: $2,071/month (full $56 COLA). High earner: $4,200/month instead of $4,300+ (lose $1,200–$1,400/year forever). SSI individual: $969/month (full $26 COLA – untouched).
Medicare premiums ($185/month Part B) eat 5-7%, but cap averts 2032’s 24% slash ($18,400/year couple loss).
Why This Proposal? Solvency vs. Fairness Battle
Social Security’s trust fund dips in 2032 without fixes. CRFB argues it’s “progressive”: full protection for poverty-level ($16,500/year) while trimming excess for $100K+ retirees. Critics (AARP) say it erodes universality. With fund at 7 years, it’s one tool among many (tax cap lift saves $1T).
What You Need to Know: Steps to Protect Yourself
COLA auto-applies January 2026 (SSI Dec 31, 2025). Cap needs Congress – track via notices.
- Check Your Status: mySocialSecurity.gov > “View COLA Notice” (Dec 2025) – see your amount.
- Update Info: SSA.gov direct deposit; file 2025 taxes early.
- Monitor Bill: congress.gov for votes (spring 2026 likely).
- Advocate/Appeal: Contact reps if affected – AARP opposes means-testing.
- Plan Ahead: Delay to 70 for 24% credits; cap adjusts by claim age.
Direct deposit fastest; scams: SSA mails only.
Final Line: A Proposal That Could Reshape Retirement
90% of seniors untouched; 10% lose thousands yearly in COLA. This could be the biggest change in decades – high earners, the clock’s ticking.
Disclaimer: This is a proposal, not law. Final details may change. Confirm with SSA.