Social Security COLA 2026: Another Modest Increase, Is it Enough?

The Social Security Administration announced the COLA for 2026 a bit late this year due to the government shutdown. However, starting in January, Social Security paychecks will reflect a Cost of Living Adjustment (COLA) of 2.8%. The small bump is due to inflation holding relatively steady this year. And, while the 2026 COLA is higher than the 2025 increase of 2.5%, it is much lower than the record-setting 8.7% bump that was awarded in 2023 when inflation was skyrocketing.

2.8% COLA is Around the Average Over the Last 20 Years

The 2.8% bump is slightly higher than the 2.6% average increase seen over the last 20 years, but significantly smaller than a longer-term average. Over the last 47 years, the average COLA has been calculated at 3.7%.

The relatively modest increase for 2026 may feel inadequate, especially when prices still seem high and medical costs are increasing at a faster rate than other goods and services.

High and low COLA increases

Since 1975, when COLAs were introduced, the highest Social Security COLA was 14.3% in 1980, but that was an anomaly. The only other times when the COLA was at or above 8% were in 1975 (8%), 1979 (9.9%), 1981 (11.2%), and 2023 (8.7%).

And, it is interesting to note that there have been 3 years with a 0% increase (2010, 2011, and 2016).

There is an upside to a modest COLA increase

It might seem like a big increase in Social Security benefits is good news, and smaller increases are bad. However, the bigger paychecks are intended to help retirees keep pace with inflation. And, inflation isn’t really good news for anyone.

Will a 2.8% Increase Be Enough to Maintain Quality of Life?

This year’s COLA could be helpful. However, recent data from The Senior Citizen’s League (TSCL), an advocacy group, found that the purchasing power of Social Security benefits has declined by 20% since 2010. TSCL’s research found that 94 percent of seniors said the 2025 COLA of 2.5 percent was too low and would cause their monthly checks to fall behind inflation.

Because of the way COLA is calculated (see below), Social Security increases usually fail to keep pace with the true costs of most senior households.

How much will Social Security paychecks increase with this COLA?

Social Security benefits vary widely depending on when you start benefits and your income levels over your working lifetime. However, on average, the spike will boost retirees’ monthly payments by $54, from an average benefit of $2,0008 to $2,062 with the COLA.

See the impact of the 2026 COLA on your own retirement plans

It is a good idea to always keep your retirement plans updated with any changes to your financial situation. You may want to update your Social Security benefit amount as well as your inflation projections in the Boldin Retirement Planner.

The Social Security Administration usually notifies people about their new benefit amount by mail. If you have a personal my Social Security account, you should be able to view your COLA notice online.

How Social Security’s Cost of Living Adjustment (COLA) Is Calculated

The first Social Security COLA increase was in 1950. It took an act of Congress, and the benefit increased by 77%. Two more acts of Congress in the 1950s brought the total increase to 125% over its original level by the end of the decade. From 1950 to 1975 the COLA was increased by single acts of Congress nine times.

In 1973 legislation was passed that dictated that Social Security benefits would keep pace with inflation, and the first yearly automatic COLA increase was in 1975. The Social Security Act specifies that COLAs are determined based on increases (decreases are not used) in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The Social Security Administration uses the average CPI-W data from July, August, and September of the previous year and compares it to the same time period of the current year. The percent change in the two numbers is the COLA increase.

The way Social Security COLAs are calculated penalizes retirees

As it says in the name, the CPI-W measures the increases in costs of the types of things that urban workers typically buy. The problem with using this measure for Social Security is that retired seniors spend money quite differently from most workers. Most notably, seniors spend quite a bit more on healthcare than the general population.

To make matters worse, healthcare costs have typically risen much faster than most other goods and services. Different measures show that healthcare costs have risen 3% to 12% each year in the last decade. And seniors spend a greater proportion of their income on healthcare than an average worker.

According to the Senior Citizens League, “The suppressed growth in Social Security benefits not only creates ongoing benefit adequacy issues for retirees, but also Medicare budget problems when the COLA is not sufficient to cover rising Part B premiums for large numbers of beneficiaries.”

Alternatives to the CPI-W method of calculating the Social Security COLA have been proposed, including something called the R-CPI-E for “Retirement Price Index for Elderly Americans.” This method of calculating inflation specifically for people over the age of 62 was mandated by the Older Americans Act of 1987, but it has never been used to update the Social Security COLA.

How to Make Sure You Have Sufficient Retirement Income

Social Security is only designed to replace part of your retirement income. It is almost (but not quite) impossible to live on Social Security alone.

Here are 4 things you should do to make sure you have sufficient retirement income, regardless of Social Security 2022 increases:

1. Calculate All Sources of Retirement Income

You will want to think about how you will be withdrawing and/or earning from savings and whether or not you have a pension, passive income, or a retirement job.

2. Estimate Your Retirement Expenses

How will your spending change over the course of retirement?

3. Assess Inflation

Ronald Reagan said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.” And, it is true. Inflation will make whatever money you have become worthless. That is one of the reasons why predicting and calculating inflation correctly is so important for your future financial security.

4. Protect Yourself from Other Risks

Inflation is not the only unknown that could devastate your retirement finances. You also need to plan for a long life, a healthcare emergency, natural disasters, and more.

Build Projections of Social Security Income Into Your Retirement Plan

Sound complicated? It does not need to be.

The Boldin Planner is an easy-to-use but super-detailed tool that will tell you if you have sufficient retirement income. You can set different levels of spending and income for different phases of retirement.

You can even set your own estimated inflation rates – one for general spending, another for housing, and medical costs can also be specified separately. Try different rates for each category and see how much it impacts your retirement financial health.

FAQ: Social Security COLA 2026