For more than 53 million retired workers, Social Security is not just a monthly check—it is the backbone of their retirement income. In June, the average Social Security benefit was $2,005 per month, a modest amount given rising costs.
Yet surveys consistently show that nearly 80% to 90% of retirees rely heavily on these payments to meet essential expenses like housing, food, and healthcare.
As retirees await the 2026 Social Security cost-of-living adjustment (COLA), there is both excitement and concern. While projections suggest another above-average increase, many experts warn that retirees could still be left worse off due to inflation and rising healthcare costs.
The 2026 COLA Estimate
Forecasts for the 2026 COLA currently stand at 2.7%, meaning the average monthly benefit of $2,005 could rise by about $54 per month, or $648 annually.
While this may sound positive, retirees must look beyond the headline figure. Inflation in key categories like housing, utilities, and medical care continues to outpace COLA increases. This means retirees’ checks may grow, but their purchasing power could still erode.
Recent COLA Increases: A Look Back
Over the past few years, retirees have seen some of the highest COLAs in decades due to inflation spikes following the pandemic:
| Year | COLA Increase | Notes |
|---|---|---|
| 2022 | 5.9% | Highest in 40 years at the time |
| 2023 | 8.7% | Largest increase since 1981 |
| 2024 | 3.2% | Above the long-term average of 2.3% |
| 2025 | 2.5% | Modest but still above trend |
| 2026 (Projected) | 2.7% | Forecasted to continue above-average growth |
If projections hold, 2026 will mark the fifth consecutive year with a COLA of at least 2.5%, a milestone not seen since the late 1980s and 1990s.
Why Retirees Could End Up Worse Off
1. COLA Is Based on CPI-W, Not Retiree Spending
The CPI-W measures the spending habits of working-age households, not retirees. Seniors spend a larger share of their income on healthcare and housing, categories that often rise faster than overall inflation.
2. Medicare Part B Premiums Eat Away Increases
Even if benefits rise by $54 a month in 2026, a significant portion may be consumed by higher Medicare Part B premiums, which are automatically deducted from Social Security checks. Historically, these premiums have risen faster than COLAs.
3. Long-Term Decline in Purchasing Power
Between 2010 and 2024, the purchasing power of Social Security fell by 20%. What $100 could buy in 2010 only covers $80 today. Unless the formula for COLA changes to better reflect seniors’ expenses, retirees may continue to lose ground.
The No-Win Scenario of COLA Adjustments
Even when COLA is high, it often means inflation is also high—so retirees gain little in real terms. When COLA is low, inflation may appear under control, but retirees still face steady increases in essentials like food, rent, and prescriptions.
Thus, the COLA can feel like a double-edged sword: it acknowledges inflation but never fully shields retirees from it.
What Retirees Can Do
- Plan for Medicare Costs – Anticipate that a portion of your COLA will go toward higher premiums.
- Diversify Retirement Income – Relying solely on Social Security can leave you vulnerable. Supplemental savings or pensions help balance costs.
- Budget for Inflation – Even modest COLAs won’t fully match rising prices. Track expenses and adjust spending where possible.
The 2026 Social Security COLA is projected at 2.7%, offering retirees a much-needed boost of around $54 per month. However, rising healthcare costs and the limitations of the CPI-W mean many retirees could still feel worse off.
While COLA protects against inflation to a degree, it is not a perfect shield. Retirees should view it as part of a broader retirement strategy rather than the sole safeguard of financial security.
FAQs
The 2026 COLA is estimated at 2.7%, which would raise the average monthly benefit by about $54.
Because Medicare premiums and healthcare costs often rise faster than COLA, reducing retirees’ net benefit.
It is based on the average CPI-W inflation index for July, August, and September compared to the same months in the prior year.