Social Security's COLA will be 2.8% in 2026 - but prices are now rising faster than that

By Jessica Hall

The cost-of-living adjustment is aimed at helping the program's 75 million beneficiaries keep up with inflation

About 39% of beneficiaries rely on Social Security for their entire income, according to the Senior Citizens League.

Social Security's cost-of-living adjustment will be 2.8% in 2026, up from 2.5% this year, adding about $56 to the average beneficiary's monthly check as concerns rise about inflation in healthcare, food and housing.

This is the first COLA percentage increase in four years.

The COLA has averaged 2.6% over the last 20 years, according to the Senior Citizens League, a nonpartisan advocacy group.

The average monthly Social Security check for retired workers in August was about $2,008, according to the Social Security Administration. About 39% of beneficiaries rely on Social Security for their entire income, according to the Senior Citizens League.

"COLA is so important to seniors because inflation is a big problem right now. It protects benefits in the face of rising costs," said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities, a progressive think tank.

The maximum amount of earnings subject to the Social Security tax - known as the taxable maximum - will increase to $184,500 from $176,100, according to the Social Security Administration.

Despite the current government shutdown, Social Security and Supplemental Security Income benefits for 75 million Americans will be adjusted for the 2026 COLA without any delay, beginning Jan. 1, 2026, the Social Security Administration said.

"Inflation is always an emotional and real concern," said Rob Williams, managing director and head of wealth management research at Charles Schwab. "If inflation is saying that COLA is 2.8% and the question is, is that enough, there's an emotional and mathematical response. Emotionally, people always want more as costs are rising. But the 2.8% is mathematically backed by the numbers."

COLA is not a raise, but is rather an adjustment to help benefits keep pace with inflation.

A survey conducted in September by AARP found that 72% of older Americans said a COLA of 5% or higher would be necessary to keep pace with real-world rising costs, while 26% indicated that an 8% increase would be necessary.

"Over the past year, many older Americans have been financially squeezed, and Social Security is an important key to their financial health. It isn't just a source of income - it's a lifeline of independence and dignity for tens of millions of older Americans. Yet even with the COLA, 77% of older adults still face challenges covering basic expenses," said Myechia Minter-Jordan, chief executive of AARP.

The poverty rate for people 65 and older grew to 15% in 2024 - the only age group experiencing an increase, according to the U.S. Census Bureau.

Read: Inflation is the 'No. 1 public enemy' of your finances: Social Security's COLA isn't enough for retirees to get by

The consumer-price index for urban wage earners and clerical workers, known as CPI-W, is used to determine the actual COLA. That index more heavily weights costs for urban nonretirees, such as those for transportation, food and clothing.

Read: Social Security could adopt a 'senior-friendly' COLA index - but retirees still won't get more money

Some of the COLA will also be eroded by an increase in the Medicare Part B premium, which is deducted from Social Security checks directly. The standard Part B premium is projected to be $206.50 in 2026, representing an 11.6% increase from 2025.

"Rising Medicare premiums alone could fully consume the COLA for many seniors in 2026," said Mary Johnson, an independent Social Security and Medicare policy analyst. Medicare Part B premiums and some Part D plan premiums appear to be on track to make the biggest jump in terms of dollar amount in program history in 2026, Johnson said.

"The challenge for beneficiaries is how to keep up with other expenses. For older adults, healthcare and housing and food continue to be an issue," said Mike Lynch, managing director of applied insights at Hartford Funds.

There's both an upside and a downside to having a higher-than-average COLA. Beneficiaries will receive more money each month in 2026, but that's also a sign that inflation is only modestly in check, Lynch said.

"COLA might reflect the inflation rate, but it is woefully insufficient for older Americans who already have high healthcare costs and are facing even greater increases in their Medicare costs in 2026," said Ramsey Alwin, president and chief executive of the National Council on Aging. "Once again, older adults will have to make heart-wrenching decisions about whether to spend their fixed incomes on healthcare, food or housing."

Social Security was never intended to be the primary source of income for retirees. It's meant to be part of a combination of income sources, including savings and investments such as 401(k) plans. A majority of seniors have other sources of income, Williams said.

The COLA announcement comes as Social Security itself faces uncertainty. The trust fund that backs Social Security faces insolvency in 2033, at which point the fund would pay out only 77% of scheduled benefits if Congress doesn't act to shore up the program, according to the Social Security and Medicare boards of trustees.

Social Security's chief actuary, Karen Glenn, also issued a warning that the insolvency date could be pushed up because of the Republican tax bill known as the One Big Beautiful Bill Act, which was signed into law this summer and included a temporary enhanced tax deduction for older Americans.

"Seven to eight years away is a lifetime when it comes to Congress. There's certainly high awareness that the Social Security trust fund date is out there," Williams said.

-Jessica Hall

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10-24-25 1645ET