How the 2.8% Social Security COLA Held Up Against Inflation, 3 Months In

There's no denying everything's more expensive these days -- and not just compared to several years ago. Already uncomfortably priced at the time, the cost of basic goods like groceries and gasoline, along with rent, healthcare, and utility bills, seems higher now than they were just a few months ago.

And this begs the question: Has the 2.8% cost-of-living adjustment (COLA) to Social Security's monthly benefit payments put in place at the beginning of this year already been rendered meaningless, if not outright inadequate?

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What's a COLA?

If you're not familiar with the term, a COLA is exactly what it sounds like -- an increase in the size of a payment that reflects any increases in what it costs to simply live.

In this instance, the adjustment the Social Security Administration makes for any given year is ultimately determined by the U.S. Bureau of Labor Statistics' calculation of domestic inflation as measured by the consumer price index, or CPI. Specifically, the Census Bureau's average year-over-year rate of inflation for each month of the third calendar quarter is the amount of the COLA put in place at the beginning of the following year.

This year, that adjustment was a 2.8% increase of 2025's payments.

An unfair approach to how it's determined

There is some understandable pushback to this approach, however, rooted in a couple of concerns. One of them is the timing of when COLAs go into effect. Although Social Security's beneficiaries always eventually get what they're due, it's always after -- sometimes well after -- their costs have grown.

The other point of contention is far more problematic to the majority of people who depend on Social Security payments. That's the 53.6 million retirees who are currently collecting Social Security retirement benefits. Their effective cost of living isn't necessarily reflected in the Bureau of Labor Statistics' broad calculation of inflation, which specifically reflects changes in the cost of living for the nation's households where work-based wages are the primary source of income -- a measure called CPI-W. Another metric is the CPI-E, which is specifically designed to reflect the cost of living for the nation's elderly (aged 62 and up). The CPI-E can be and often is distinctly different from the CPI-W figure. For the entirety of 2025, the Bureau of Labor Statistics' CPI-E grew on the order of 2.9% following 2024's 3.1% increase. Both numbers are bigger than the comparable calculations for working-aged households for the same time frame.

Unsurprisingly, higher healthcare costs are a key source of seniors' higher cost of living.

COLAs are not keeping up

Fast-forward to today. What's already changed since 2025's COLA went into effect for 2026?

Through March, the CPI-E is up nearly 3.3% over the past 12 months, with gas and food accounting for the biggest piece of this increase. Even stripping out those two categories from the calculation, prices are still up 2.6% year over year as of last month.

And it's even worse for people at or over the age of 62, who are more likely to be receiving -- and dependent on -- Social Security benefits. Their overall costs are up nearly 3.3% for the past 12 months, with nearly half of that increase materializing just since the end of last year. Transportation and housing costs are the biggest reasons for their increased cost of living, although it's not like the rising price of healthcare isn't a key contributing factor.

Worse, the total CPI-E figure is now 25% above where it stood just five years ago, underscoring how seemingly small COLA shortcomings can cumulatively turn into more serious ones over time.

Action is the solution

Retirees' frustration with insufficient Social Security COLAs is understandable. Just don't dwell so much on the unfairness of the matter that you end up losing perspective on it. This year's 2.8% cost-of-living adjustment only added about $58 to the typical monthly retirement benefits payment of $2,071. The increase that retirees arguably deserved wouldn't have been overwhelmingly better -- only about $60 per month.

Also, don't become so fixated on a number you can't do anything about that you forget to do what you can with the numbers you can control. This includes shopping around for higher-yielding places to park your cash before you need it, or swapping out lower-yielding income investments for ones that generate better cash flow. Just raising your average yield on $10,000 worth of dividend stocks from 3% to 3.5% translates into an additional $50 worth of annual dividend income, for instance, which is a very attainable tweak for most retirees. It might also pay to shop around for a different Medicare supplement.

The point is, your cost-of-living adjustments may not actually match your rising cost of living, but a little bit of action can go a long way in offsetting the actual inflation headwind you're facing.

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