Changes Coming for Social Security and Medicare in 2026

If possible, taxpayers may want to manage income heading into retirement to avoid facing higher Medicare Part B premiums (note that Medicare Part D premiums also increase at higher income levels). Be mindful that premiums are based on income tax returns from two years prior. For example, your tax return at age 63 will determine premiums when enrolling in Medicare at age 65.

It may be wise to avoid a large surge in income (from a Roth IRA conversion, for example) during the two-year period prior to activating your Medicare benefits. This influx in income may result in higher Medicare premiums. On a positive note, qualified distributions from Roth accounts are not factored into the income calculation to determine Medicare premiums. For that reason, partial Roth IRA conversions during one’s working years may be a way to achieve tax diversification heading into retirement, while also avoiding higher Medicare Part B premiums in some cases.

Regarding Social Security, those who are still working should not opt to claim benefits prior to their full retirement age since it’s likely that benefits will be withheld due to the earnings test. The earnings test does not apply once an individual reaches their full retirement age (age 67 for those born in 1960 or later). If longevity risk (i.e., outliving one’s savings) is a concern, consider delaying Social Security past full retirement age. Retirement benefit amounts will increase by 8% for each year delayed up to age 70.

For more insight on planning for Social Security benefits see our investor education resource “Five things you need to know about optimizing Social Security.”

To understand the basics of how Medicare works, read, “Three key things to understand about Medicare.”

A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Franklin Templeton, its affiliated companies, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Franklin Templeton has environmental, social and governance (ESG) capabilities; however, not all strategies or products for a strategy consider “ESG” as part of their investment process.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S. by Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com. Investments are not FDIC insured; may lose value; and are not bank guaranteed.

You need Adobe Acrobat Reader to view and print PDF documents. Download a free version from Adobe's website.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

© Franklin Templeton

Read more commentaries by Franklin Templeton