Every year, the Social Security Administration (SSA) makes an announcement about how much Social Security benefits will increase, for the following year. What is this increase? the increased is referred to as the cost-of-living adjustment (COLA). COLA is meant to assist people keeping up with the rising costs of inflation, in simple terms, to keep up with the increasing costs of the economy.
But there’s another side to the story: even with this higher raise, everyday costs may still climb faster than benefits.
How Much the Raise Will Be
The Senior Citizens League (TSCL) projected that, based on the most recent statistics, the Social Security COLA will be 2.7% when it is published next month, increasing the average monthly income for retired workers by $54 from $2,008 to $2,062.
The final COLA for 2026 will be revealed following the release of the September CPI data in mid-October, since Social Security’s COLA is determined using a variation of CPI data that measures average annual inflation for the months of July, August, and September.
Why the Increase Is Higher Than Expected
Let’s understand what COLA is based on. In simple terms, COLA is based on inflation. Inflation measures how much the cost of everyday items, increase. The SSA uses the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) to calculate inflation.
During the years of 2024 and 2025, inflation had seemed to cool down. For this reason, the 2026 predictions were modest. However, as 2025 went by, the price of essentials started to increase. As a result of this, the COLA went higher.
The Catch: Expenses Are Rising Too
Even though a raise sounds very nice, it is important to remember everything else that is increasing:
- Medicare Part B premiums are expected to go up in 2026.
- The prices of food and groceries is also increasing.
- Housing and utilities remain unpredictable.
Simply put, the increase in Social Security payments could potentially be used up by the rising costs of the above, before you are able to see an increase.
How This Compares to Recent Years
If the 2026 increase feels small, it’s because the last few years have seen some big swings:
- 2023: 8.7%.
- 2024: 3.2%.
- 2025: 2.6%
The lowest COLA was 0.0% in 2010 and 2011, while the greatest COLA was 8.7% in 2023.
What This Means for You
Here are a few things you can do to ensure financial stability:
- Check how much your Medicare premiums are expected to increase and plan accordingly.
- Make sure you budget properly, be sure to know what your expenses and what can be cut out from your budget.
- Try and look into other support programs for food and groceries if you aren’t able to manage with Social Security only.
Looking Forward
Yes, the COLA system is indeed created to protect Social Security beneficiaries from the rising costs of inflation. However, sometimes, inflation does not reflect the true spending of the elderly population.
The Consumer Price Index for the Elderly, or CPI-E, has been proposed by certain politicians as an alternative index that could more accurately represent the true expenses of living for elders. However, the present system is still in effect for the time being.
Bottom Line
The Social Security raise might something to look forward to, but it is important to factor in other increases that may be knocked off from the Social Security check. With the increases in prices of healthcare and food, beneficiaries may hardly see the raise.
It is important that beneficiaries plan in advance and budget accordingly so that they can avoid any financial stress. Planning is key!