A friend called at nine this morning. I had not finished my coffee. Three point six, he said, like a ballgame score.
Then came the question every retiree asks by lunchtime. How much of it do I keep?
For a lot of us, less than the headline. That is your read this afternoon. It starts with a tax rule older than most of our cars.
Since 1984, part of a Social Security check becomes taxable once a retiree’s income crosses a line. The line is $25,000 for a single filer and $32,000 for a married couple.
The income that counts here includes half of your Social Security plus your other income. Tax people call it provisional income.
Those two numbers have never moved. Not for inflation, not for anything. Every raise since then has pushed more checks over the line.
Fewer than one beneficiary in ten paid tax on benefits in 1984. Social Security’s own researchers projected 57.4% would owe it by 2025.
The same raise looks different from the two sides of the ledger.
What they get: the raise
3.6% from January, about $75 more a month for the average retiree. Roughly $900 over a year, the largest bump in four years.
What it runs into: a 1983 line
Indexed to prices since 1984, the $25,000 line would sit near $80,600 today, and the $32,000 line near $103,200. Instead they have not moved a dollar.
So the raise works two ways at once. It lifts the check. For retirees near the line, it also lifts the taxed share.
The squeeze is sharpest in the middle. Think of a modest pension plus a few required withdrawals. Each new dollar of benefit can drag older dollars into taxable income.
That is the wallet half of today’s news. The raise lives on a letter. What you keep lives on next spring’s tax form.
Where the cohort’s money sits this quarter, and where the raise lands in each aisle.
Here the honest limit matters. For many households the rule cuts less deep than it sounds. Retirees living mostly on Social Security often stay under the line.
A temporary extra deduction for people 65 and older also runs through 2028. The tax money also stays in the system. It flows back into Social Security itself, $57.8 billion of it in 2025.
The arithmetic
2027 COLA of 3.6%, the largest in four years, for about 75 million people from January 2027, average retirement benefit up about $75 a month: Social Security Administration announcement of October 14, 2026, as reported by CBS News and Fox Business. About $900 a year per retiree: Committee for a Responsible Federal Budget, October 14, 2026. Taxation thresholds of $25,000 (single) and $32,000 (married filing jointly) in provisional income, in effect since 1984 and not indexed: Social Security Amendments of 1983; IRS Publication 915. Fewer than 10% of beneficiaries taxed on benefits in 1984 and a projected 57.4% owing income tax on benefits in 2025: Social Security Administration, Income Taxes on Social Security Benefits, Issue Paper 2015-02 (December 2016). Thresholds indexed to prices, Boomers Trade’s own arithmetic: CPI-U 1984 average 103.883, August 2026 334.980 (FRED, CPIAUCNS), factor 3.225; $25,000 x 3.225 = about $80,600 and $32,000 x 3.225 = about $103,200. Income taxes on benefits credited to the Social Security trust funds, $57.8 billion in 2025: AARP, citing the Social Security Trustees. Temporary additional deduction for taxpayers 65 and older through tax year 2028: 2025 federal tax law, as summarized by AARP. The friend’s phone call is an illustration.
Your personal letter with the new amount arrives by mail before the end of the year. When it comes, add half the new yearly benefit to your other income and hold the total up against $25,000 or $32,000. That one sum tells you how much of today’s raise is really yours.
Andrew
Boomers Trade is written by someone getting older right alongside you, and watching who profits from it.
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