Northrop Grumman Employees: Preparing for the 2026 Social Security COLA Increase

Healthcare Provider Update: Healthcare Provider for Northrop Grumman: Northrop Grumman provides various healthcare benefits through multiple providers, including major insurers such as UnitedHealthcare, Aetna (CVS Health), Anthem (Elevance Health), and Cigna. Their offerings include comprehensive health insurance plans, which encompass medical, dental, and vision coverage to address the diverse needs of their employees. Potential Healthcare Cost Increases for Northrop Grumman in 2026: As Northrop Grumman navigates the complex landscape of healthcare costs, employees may face significant increases in their out-of-pocket expenses in 2026. Healthcare premiums are projected to rise sharply, with many states experiencing hikes of over 60%, driven by a combination of escalating medical costs and the potential loss of enhanced federal subsidies. A report from the Kaiser Family Foundation indicates that approximately 92% of ACA marketplace policyholders could see their premiums swell by more than 75%, reflecting the profound impact of regulatory changes and heightened insurer rate demands. This environment calls for proactive planning and financial preparation to mitigate the impending financial challenges associated with healthcare coverage. Click here to learn more

'With the 2026 Social Security COLA set to increase income for many Northrop Grumman employees in retirement, thoughtful coordination of benefits and withdrawals is essential, as rising income can also elevate tax exposure.' —Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

'While the Social Security COLA boost may offer added income for Northrop Grumman employees entering retirement, it’s important to plan carefully, as higher benefits can also raise taxable income over time.'—Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. How the 2026 Social Security cost-of-living adjustment (COLA) impacts Northrop Grumman retirees.

2. Tax implications of higher Social Security benefits and ways to manage them.

3. Timing strategies for Social Security benefits and available deductions for retirees.

What Northrop Grumman Retirees Need to Know About Social Security COLA 2026

The Social Security cost-of-living adjustment (COLA) for 2026 is set at 2.8%, slightly higher than the previous year’s 2.5% increase. ¹  This annual COLA, announced by the Social Security Administration (SSA) in October and applied to January benefits, helps retirees maintain purchasing power during inflationary periods. For Northrop Grumman employees nearing or in retirement, this adjustment can play a key role in income planning.

According to the Bureau of Labor Statistics, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—which determines COLA—increased 3% over the 12 months ending September 2025. ²

While this is lower than the 8.7% increase in 2023, ³  it may still offer meaningful relief to Northrop Grumman retirees experiencing higher living expenses.

How Higher Benefits Could Affect Taxes

As Social Security benefits rise, your combined (or “provisional”) income may increase, which can cause a greater portion of your benefits to be taxed. Combined income includes wages, pensions, interest, dividends, taxable withdrawals from traditional 401(k)s or IRAs, non-taxable interest, and half of your Social Security benefits. 

For single filers with income below $25,000 and joint filers below $32,000, Social Security benefits are not taxed. Between $25,000 and $34,000 for single filers and $32,000 and $44,000 for joint filers, up to 50% of benefits may be taxable. Income above those ranges can result in up to 85% of benefits being taxable. ³  These income thresholds are not adjusted for inflation, which means Northrop Grumman retirees may experience increased taxation over time as income rises.

Withdrawals from traditional Northrop Grumman retirement plans, such as 401(k)s and IRAs, are treated as ordinary income and can increase the taxable portion of Social Security benefits. Thoughtful timing of withdrawals may help manage tax exposure.

Strategies to Manage Tax Impact

If rising taxes are a concern, the following strategies may help:

• Balance withdrawals across account types.  Coordinating distributions from tax-deferred, taxable, and Roth accounts may help you meet required minimum distribution (RMD) rules while managing your tax bracket.

• Use taxable accounts strategically.  Only capital gains—not your initial investment—are taxable.

• Consider tax-free withdrawals.  Qualified distributions from Roth IRAs, Roth 401(k)s, or Health Savings Accounts (HSAs) are not included in taxable income and do not affect Social Security taxation.

New Senior Tax Deduction: 2025–2028

Beginning in 2025, a new senior deduction of $6,000 per person ($12,000 for joint filers) will be available to taxpayers age 65 and older. This deduction phases out at $75,000 adjusted gross income (AGI) for single filers and $150,000 for joint filers. 

This deduction is in addition to the age-65+ standard deduction increase of $2,000 for single filers and $1,600 per eligible spouse for joint filers in 2025. Northrop Grumman retirees may wish to include this in long-term tax planning.

Timing Your Social Security Benefits

Delaying Social Security until full retirement age (67) or up to age 70 generally results in higher lifetime benefits. Benefits increase by about 8% for each year you delay claiming between your full retirement age and age 70. 

For Northrop Grumman retirees, delaying benefits may provide additional flexibility in coordinating income from pensions, savings, or retiree medical accounts.

Social Security provides inflation-adjusted income for life, which may contribute to financial stability when aligned with corporate retirement benefits.

Keep the Big Picture in Mind

While the 2026 COLA helps counter rising costs, it can also raise taxable income for some retirees. Thoughtful planning around withdrawals, deductions, and timing of benefits can help manage long-term taxes. Because tax laws are complex, developing a multi-year strategy with a financial advisor is recommended.

The Retirement Group can help Northrop Grumman employees explore Social Security strategies, tax-focused withdrawal planning, and retirement income coordination. For more information, call The Retirement Group at  (800) 900-5867 .

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Sources:

1. Social Security Administration.  Social Security Announces 2.8 Percent Benefit Increase for 2026 . U.S. Government, 24 Oct. 2025,  https://www.ssa.gov/news/en/press/releases/2025-10-24.html .

2. Bureau of Labor Statistics. ' Consumer Price Index Summary ,' September 2025.

3. Markowitz, Andy. “Why Social Security COLAs Can Increase Your Taxes.”  AARP , 6 Feb. 2024, updated 10 Feb. 2025,  https://www.aarp.org/social-security/benefits-taxes-cola/ .