The 2026 Social Security COLA Is In -- Here's Your New Benefit, and Why Retirees Say It Falls Short

Social Security has been one of America's top social programs for many decades, providing guaranteed income that has helped keep millions of retirees out of poverty in their golden years.

There are many moving parts to Social Security, several of which are constantly changing. Some changes are one-off, while others are ongoing and expected. One change that falls into the latter bracket is the annual cost-of-living adjustment (COLA).

The announcement -- which normally occurs on Oct. 15 each year -- came late this year because the government shutdown delayed the announcement of key data in determining the COLA, but it's finally here. Starting on Jan. 1, 2026, Social Security recipients can expect a 2.8% boost to their monthly benefits.

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How the Social Security Administration calculates the annual COLA

The purpose of the annual COLA is to help retirees offset some of the negative effects of inflation. Having a situation in which prices continue to rise while retirees remain on a fixed income that stays the same over the years would be far from ideal, to say the least.

That's why the Social Security Administration (SSA) calculates the annual COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an inflation metric released monthly by the Bureau of Labor Statistics (BLS). The CPI-W looks at price changes in common goods and services like food, transportation, healthcare, and housing.

Getting to the exact COLA percentage is a relatively simple three-step process. First, the SSA takes the average CPI-W data for the third quarter (July, August, and September) of the current year. Then, it compares it to the Q3 average from the previous year. Lastly, it sets the COLA for the upcoming year as whatever the percentage increase is, rounded up to the nearest tenth of a percentage. If the average declined, there is no COLA, but benefits are not reduced.

In the case of the 2026 COLA, the CPI-W average from 2025 was 317.265, while the average from 2024 was 308.729. This 2.76% increase is how the 2.8% COLA was set.

Why retirees say the 2026 COLA falls short

Next year's 2.8% COLA is higher than 2025's and tied for the fourth-highest in the past decade. However, it doesn't exactly have retirees jumping for joy, since it's still likely to fall short of fully offsetting the inflation retirees face in their daily spending. A 2.8% boost to benefits is good, unless your true inflation costs are well above that.

According to the senior advocacy group The Senior Citizens League (TSCL), Social Security recipients' purchasing power has declined noticeably over the years. TSCL says that spending power has declined by 36% since 2000 and by 20% since 2010. Needless to say, that presents a major problem for retirees.

The good news is that most people are aware of this issue. The bad news is that there are no clear signs of this changing with the current way the annual COLA is calculated. There have been other metrics proposed as alternatives -- such as the CPI-E, which focuses on costs more commonly faced by people age 62 and older -- but there's no guarantee that these changes will ever be made.

Why won't the Social Security Administration change how it calculates the COLA?

It's totally reasonable for Social Security recipients to wonder why the SSA wouldn't change the COLA calculation process to ensure that their spending power remains roughly in line with inflation. Unfortunately, the SSA is likely considering the fact that larger COLAs mean that the Social Security Trust Fund depletes faster, because the program won't be bringing in revenue at the same pace at which it's paying out benefits.

The latter might not be the best excuse, but it's a real concern. Recent estimates show that Social Security would have to slash benefits by around 23% in 2033 at its current depletion rate. That's a much bigger problem than a less-than-ideal COLA.

In the meantime, the best thing retirees can do is calculate their monthly Social Security benefit for 2026 (current benefit times 2.8%), and begin to adjust their budgets accordingly if they deem it necessary.

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