The Social Security Administration announced a 2.8% cost-of-living adjustment (COLA) for 2026. That’s up a notch from 2.5% this year but in line with the 2.6% average over the past two decades.
Starting in January, the increase will add an average of $56 per month for 75 million retired seniors and disabled workers who have struggled with higher prices this year. But droves of seniors will still lag behind when it comes to making ends meet in retirement.
“The Social Security COLA is especially important this year, with inflation on so many people’s minds,” Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities, told Yahoo Finance.
“The annual cost-of-living adjustments are most retirees’ only source of retirement income, not subject to inflation risk. That inflation protection is really important, because Social Security is the biggest source of income for most retirees.”
The COLA is calculated using the Consumer Price Index for urban workers, or CPI-W, which weights the costs of goods and services paid by the urban segment of the population more than other expense categories. It averages data for July, August, and September and then compares that figure with the same data from last year.
Critics argue that the index does not accurately reflect the expenses many seniors face.
“The COLA needs to reflect the cost of aging, not just the cost of inflation,” Shannon Benton, executive director of the Senior Citizens League, a nonprofit advocacy organization, told Yahoo Finance. “The formula used to calculate the COLA is outdated and doesn’t reflect what seniors actually spend money on, like healthcare, rent, and prescription drugs. It’s long past time for a fix.”
On Friday, government data showed inflation rose 0.3% over last month and 3% over the prior year in September. Initially slated for release on Oct. 15, CPI data was released with a delay despite the government shutdown because it is required by law for calculating the COLA before Nov. 1.
“Social Security recipients are unlikely to feel that the COLA will be enough to meet the rising costs of even the most basic needs,” Mary Johnson, a Social Security and Medicare policy analyst, told Yahoo Finance.
According to Nancy Altman, president of Social Security Works, a nonprofit advocacy organization: “Social Security’s automatic annual cost-of-living adjustment is intended to ensure that benefits don’t erode over time. It is one of the key reasons Social Security is superior to private sector alternatives, but Congress should update the formula used to calculate annual COLAs to more accurately measure rising costs.”
Medicare premiums are projected to rise by about 11.6%, around twice as large an increase as last year. For the average beneficiary, this will consume almost half of their COLA increase, she said.
“For some beneficiaries, it will consume their entire COLA increase,” Altman noted.
In general, people who receive Social Security benefits are notified by mail in early December about their new benefit amount. Most beneficiaries can also view their COLA notice online through their personal Social Security account at ssa.gov/myaccount/.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky.
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