Timely Topics

Updates and reminders that may impact your personal financial planning

Social Security Updates for 2026

Social Security and Supplemental Security Income benefits will increase for 2026 by 2.8%. For some this will begin on December 31, 2025, but for most the increase will begin with their January payment.

The taxable wage base limit for Old-Age, Survivors, and Disability Insurance (OASDI) has increased for 2026. The new wage base is $184,500, up from $176,100 in 2025. Individuals contribute 6.2% of their pay, with a matching contribution made by employers, up to this wage base. The rate for self-employment income is 12.4%. Taxable income earned above the wage base is not subject to OASDI. 

Medicare Updates for 2026

Open Enrollment for 2026 began on October 15^th and ends on December 7^th.

2026 Medicare premiums, deductibles, and co-insurance have been announced.

Medicare Part D:

• The maximum deductible will be $615 in 2026, up from $590 in 2025.
• The out-of-pocket maximum for drug expenses is $2,100 per patient (this includes deductibles, copayments, and coinsurance for covered drugs), up from $2,000 for 2025.

Medicare Part B:

• The standard monthly premium will increase to $202.90 in 2026; up from $185 in 2025. Those with income-related monthly adjustment amounts will also see an increase.
• The Part B deductible will increase by $26 to $283 per beneficiary.

Medicare Part A:

• Inpatient hospital deductible will increase by $60 to $1,736.
• Daily co-insurance for days 61-90 will increase by $15 to $434.
• Daily co-insurance for lifetime reserve days will increase by $30 to $868.
• Skilled nursing facility coinsurance will increase by $7.50 to $217.

Income brackets for the income-related monthly adjustment have also been indexed for 2026. The cap for adjusted gross income on the first tier has increased from $106,000 for individual and $212,000 for joint filers to $109,000 and $218,000, respectively.

Prompting critical thinking and conversations around issues in our industry.
Not intended as personal financial advice.

Should I expect Mortgage Rates to Decline?

Following the Federal Reserve (‘the Fed”) initiating a rate cutting cycle in September, people are talking about the likelihood of loan rates declining. We thought it would be helpful to provide some perspective on the topic as it relates to mortgages.

To get started, it is important to understand that the Fed is only adjusting the Federal Funds Rate, which is the interest rate banks charge each other for overnight loans on reserves. So, this is the shortest term lending rate that exists, and has a clear, direct influence on rates for short term instruments (e.g. savings accounts) and other vehicles linked to short term rates (e.g. lines of credit).

Generally, we can expect longer term rates to be higher than shorter term rates. The reason is simple – a lender assumes more risk when lending money for a longer period of time. That said, there is no standard difference between short term and long term rates. Longer term interest rates are driven by many factors including inflation expectations, economic growth prospects, fiscal policy (government spending and debt), and investor sentiment.

Since September of this year, the Fed has reduced the Fed funds rate by 50 bps (0.50%) in total. In the same period, prevailing rates for conventional 30-year mortgages have only declined by about 0.3%. We do not know if the Fed will pursue further rate reductions. If they do, we think it is a mistake to assume that mortgage rates will follow.

First off, history shares some lessons…

• In 1997-98, the Asian currency crisis had ripple impacts on some banks and fund managers in the US, which caused the Fed to reduce the short term rates from 5.5% to 4.75% (75 bps). However, the domestic economy in the US was in expansion, so mortgage rates barely reacted to the easing cycle and hovered around 7%.
• A more recent and starker example of this break in correlation is in September 2024, when the Fed reduced the federal funds rate by 0.50%, but mortgage rates went the other way, up by 0.50%. This was because the market did not believe that the threat of inflation had subsided.

Secondly, mortgage rates are closely linked to yields on the US 10-year treasury bond. In our opinion, two of the biggest influences on the US treasury bond yield, which may outweigh any action the Fed takes, are:

• Inflation expectations: Investors demand higher yields if they expect inflation to increase. We are currently in an environment with heighted inflationary risks from tariffs and deglobalization.
• Government spending: Higher government budget deficit leads to more debt issuance, thereby pushing yields higher to attract investors. Our government continues to run over-growing budget deficits.

The direction of long term interest rates is complicated and hard to predict. The Fed has some influence but little real control over mortgage rates. We think it is more useful to think about mortgage rates in a historical context. Our recency bias has us believe that mortgage rates should be below 5%. However, average annual mortgage rates have been higher than today’s rates for 36 out of the 54 years for which we have data available. In closing, we feel today’s mortgage rates are attractive.

We hope you find this perspective helpful, and as always if you have questions about your personal situation, please feel free to reach out.