Retirees could expect only a small bump in their Social Security checks next year. The Social Security Administration (SSA) will announce the official 2026 cost-of-living adjustment (COLA) in the fall, but the latest projection shows just a 2.6% increase — up slightly from last month’s 2.5% estimate.
The COLA is tied to inflation and determines how much benefits go up for over 72 million Americans who receive Social Security and Supplemental Security Income (SSI).
How COLA is calculated
COLA is based on inflation, specifically the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index looks at the cost of goods and services for a certain group of households. Importantly, only the inflation numbers for July, August, and September are used to calculate the increase.
For 2025, the COLA was 2.5%, which meant the average retiree’s monthly benefit rose about $49. If the new 2.6% estimate holds, the average monthly cheque — currently $2,005 — would increase by about $52 a month or $625 for the year.
Why this year’s increase is modest
There’s a catch-22 with COLA. If inflation is high, the adjustment is larger — but your money also buys less. If inflation is low, the COLA is small, but prices aren’t rising as quickly.
Currently, inflation is relatively stable compared to the last few years, which is why the COLA projection isn’t much higher than last year’s.
The hold harmless provision
One important protection for retirees is the “hold harmless” provision. This rule makes sure your Social Security check doesn’t shrink just because Medicare Part B premiums go up.
For 2025, the Part B premium is $185 a month — up $10.30 from 2024. If your COLA is too small to cover this increase, the hold harmless provision prevents your payment from going down.
To qualify, you must:
- Be receiving Social Security in both November and December 2024.
- Have your Medicare Part B premium automatically deducted from your Social Security check.
You won’t be covered by this rule if you’re enrolling in Part B for the first time in 2025, paying income-related Medicare premiums (IRMAA), or having your premiums paid by Medicaid.
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Why some want the formula changed
Some experts say the CPI-W doesn’t accurately reflect the spending habits of older adults. Instead, they suggest using the Consumer Price Index for the Elderly (CPI-E).
The CPI-E gives more weight to medical costs, which are a bigger share of expenses for seniors. For example, one year medical care made up:
- 11.3% of CPI-E
- 6.9% of CPI-U (general population)
- 5.6% of CPI-W (used for COLA now)
Using CPI-E could lead to slightly larger annual increases for retirees.
How the numbers work in practice
Here’s how the 2025 COLA was figured:
- Average CPI-W for July, August, September 2024: 308.729
- Average CPI-W for the same months in 2023: 301.236
- The difference: a 2.5% increase in benefits.
The same method will be used this fall for the 2026 COLA.
What this means for you
If the 2.6% projection holds, retirees will get a small boost — but it may be eaten up quickly by higher Medicare premiums and everyday expenses. Medicare Part B costs are expected to jump by more than 11% next year, which could take a noticeable bite out of your raise.
Knowing the projections in advance gives you time to adjust your budget. If your increase will be small, you might want to look for ways to cut costs or increase savings now rather than waiting until the new COLA kicks in.
