The Social Security Administration (SSA) recently announced its highly anticipated 2027 annual cost-of-living adjustment (COLA), which will be 3.6%—the highest figure in four years.
But buried in that announcement is also a hidden cost for high earners. The SSA is increasing the ceiling on “maximum taxable earnings” subject to Social Security tax from the current $184,500 in 2026 to $192,300 in 2027.
That means more income is now exposed to payroll taxes, which could fund the ailing Social Security trust.
A recent Social Security trustees’ report estimates the retirement trust fund will run out of money and become insolvent in just six years (as early as the fourth quarter of 2032), as Fast Company previously reported. Some 71 million Americans—54 million retired workers and 9 million of their survivors and dependents—currently receive monthly Social Security benefits.
Robert Laura, a financial planner and founder of the Retirement Coaches Association, tells Fast Company that “a bigger long-term concern is whether Congress or future administrations will use this earnings cap to help fund the SSA’s retirement benefits impending shortfall.”
He adds: “Doubling the cap could bring in an estimated $100 billion or more a year, but at a steep cost to high earners and [equal] impact [to] consumer spending.”
How much will the Maximum Taxable Earnings update cost workers?
The update to maximum taxable earnings could cost workers as much as an extra $967.20.
“The adjustment could cost some taxpayers an extra $483.60 a year, for someone who earns the maximum taxable earnings of $192,300 annually,” Laura says. “For self-employed folks, it could be as much as an extra $967.20, with the same earnings.”
What if I make more than the $192,300 maximum?
Earnings above $192,300 are not taxed by Social Security. However, a 1.45% Medicare tax still applies, per the SSA.