Beneficiaries of Social Security can expect a rather larger cost-of-living adjustment (COLA) by 2026, which will come as a welcome relief to certain individuals. Experts anticipate a raise of 2.7%, raising the average monthly benefit for retired workers by $54, beginning with the current level of $2,008 to $2,062. Even this modest increase is vital for millions of seniors and disabled Americans who rely on Social Security for sustenance.
System for calculation of COLA
The COLA is calculated based annually on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Specifically, the Social Security Administration (SSA) proceeded to determine the percentage increase for benefits by comparing the average CPI-W for July, August, and September of the current year with the same period of the previous year. This adjustment was meant to help Social Security recipients undercut the effects of inflation on their cost of living. In October, the official COLA announcement is generally made by the SSA and in the first month of the next year, it is officially implemented.
The 2.7% look ahead for the 2026 COLA is slightly better than the 2.5% increase beneficiaries received in 2025 and barely above the two-decade average COLA of approximately 2.6%. Some analyses, such as those of the Committee for a Responsible Federal Budget (CRFB), suggested that the COLA could be at 2.8%, as a consequence of the inflationary pressure still going on within the U.S. economy. Either way, this would translate into a boost in the income of Social Security recipients effective immediately.
Beneficiary financial ramifications
In practical terms, this means that a 2.7% COLA increase would raise the average monthly Social Security payment by about $54 for retired workers, from $2,008 to $2,062. The funds can help beneficiaries meet everyday lifestyle expenses, from groceries and utility bills to medical expenses. A 2.8% increase would hike the benefit by $54.70 or so, just a bit more of an economic respite.
Medicare premium offsetting gains
One caveat is that rising Medicare Part B premiums will offset a large portion of this increase. Part B premiums, often deducted from monthly Social Security benefits, are inflation-indexed to a degree. Accordingly, premiums tend to move up together with the COLA. Shannon Benton, executive director of The Senior Citizens League, noted that although the COLA is intended to allow adjustments for inflation, a substantial slice of that adjustment may be diverted to absorb higher costs of Medicare, which potentially reduces the net benefit increase for many beneficiaries.
Historical trends in COLA estimates
In contrast, looking historically, Social Security COLAs have varied dramatically in recent years. The most recent high penetration occurred in 2023, with an increase of 8.7% based on a period of high inflation after the COVID-19 pandemic. Contrarily, 0.0% was given for COLA in 2010 and 2011 when inflation was at historic lows. The current projected increase for 2026 is almost closely average, indicating a return to normal inflation adjustments.
More than 70 million Americans, among retirees, incapacitated, and survivors, rely on Social Security. For many, Social Security funds constitute large proportions of monthly income, hence COLA adjustments become indispensable in the preservation of their financial stability. Even a trivial increase leads to great comfort against the pressures of rising living costs, especially in such essentials as housing, food, and medical care.
