Retirement Social Security

Now That the 2026 COLA Is Announced, Retirees Need To Do These 5 Things

2026 COLA: What retirees should do right now.

By Katy Willis

Edited by Laura Hohenstein

Updated Nov. 3, 2025

The Social Security Administration (SSA) set the 2026 cost-of-living adjustment (COLA) at 2.8%, with higher Social Security payments starting in January and Supplemental Security Income (SSI) increases reflected on December 31, 2025 because of the payment calendar.

The COLA increase being slightly higher than the predicted 2.7% is a welcome relief to many. The problem is that inflation is still hovering at the 3% range year-over-year, which quickly eats away your COLA.

To make the most of this increase, there are a number of steps retirees need to take right away to avoid wasting your retirement savings.

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Refresh your retirement income plan and annual budget

Now that COLA has been officially announced, it's a good time to review your retirement plan. Check your my Social Security account for your exact benefit amount and run the SSA's calculators to see how your benefit changes with different claiming ages and work scenarios. You get the most precise information this way, because it uses your actual earnings record and deductions.

When looking at your plan, run your numbers with a realistic inflation assumption. Right now, for example, inflation continues to hover around 3%. So, if your benefit is $2,100, then the 2.8% COLA adds $58.80 per month, which is $705.60 per year. But, if your essential expenses are $2,500 per month and inflation is at 3%, that's roughly $900 per year in increased costs.

So yes, COLA narrows the gap, but you can see that it doesn't close it entirely. Looking at your retirement plan now helps you decide whether to trim discretionary spending, delay a purchase, or draw slightly more from savings for a few months. If you're approaching or past age 75, map your required minimum distributions (RMDs) against the new benefit to keep taxes and Medicare surcharges in check.

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Check whether more of your Social Security could be taxed in 2026

Social Security may be taxable based on your combined income, which is half of your benefits, nontaxable interest, and adjusted gross income (AGI). If you file single and your combined income is below $25,000, then your benefit remains untaxed. Up to 50% of your benefit can be deemed taxable if you earn between $25,000 and $34,000, and above $34,000, up to 85% of your benefit may be considered taxable. If you are married and file jointly, the thresholds are below $32,000, between $32,000 and $44,000, and above $44,000.

If COLA plus required minimum distributions (RMDs), interest, or part-time work nudges you over a threshold, you could owe more in taxes, so make sure you plan for it. You could, for example, request federal withholding using Form W-4V at rates of 7%, 10%, 12%, or 22%. If you prefer to keep your Social Security deposit intact, you can also set aside a small monthly amount in a dedicated account just for taxes.

Review Medicare now to avoid surprises

Many retirees have Medicare Part B (and sometimes Part D) premiums deducted from their Social Security checks, so changes here directly affect the amount that actually reaches your bank.

Open Enrollment runs between October 15 and December 7, and coverage changes go into effect January 1, the same month you get your new COLA. Use this window to compare plans, drug formularies, and out-of-pocket caps, especially if you've had medication changes or higher medical usage this year.

If your income is higher, you might find you also have income-related monthly adjustment amount (IRMAA) surcharges on Parts B and D. IRMAA is typically based on your IRS-reported modified adjusted gross income (MAGI) from two years ago, so 2024 reported income influences 2026 premiums. If, since then, you've had a life-changing event, like retirement, divorce, marriage, or widowhood, and this has reduced your income, ask the SSA to reduce or remove the surcharges using Form SSA-44.

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Update autopays, direct deposits, and bill timing

Once you know your new net amount, it's important that you audit all your automatic payments tied to your Social Security deposit. Look at utilities, insurance, credit cards, charitable gifts, streaming services, and subscriptions. If you changed Medicare coverage during open enrollment, you'll also need to account for the new premium and pharmacy costs.

You may also want to consider setting up a small monthly sink fund if you don't already have one. This covers big, irregular bills like property taxes and homeowners' insurance, so they don't take you by surprise.

It's also a good idea to check payment dates. Social Security pays on a Wednesday schedule based on your birthday for most beneficiaries, and that cadence can interact unhelpfully with bill dates. SSA's 2026 payment calendar can help you line up due dates and avoid late fees or dipping into overdrafts.

Use the raise to build reserves or pay debt

If your emergency fund is tiny or non-existent, then route at least part of your COLA into a cash cushion so a surprise car repair or dental bill doesn't force you into high-interest debt. Even $40 to $70 per month squirreled away regularly can quickly add up.

If you're already carrying high-interest balances, set aside a portion of your COLA for savings and use the rest to pay off the highest-rate loan or credit card first. The interest you eventually stop paying each month can easily eclipse the value of COLA over the course of a year.

Even if you're on a tight budget, it's smart to use half for essentials like heavier energy use during winter, and route the other half to savings. If you're lucky enough not to carry any debt and to already have a decent emergency fund, you can channel a slice of the COLA to long-term maintenance you've been putting off, like roof repair, medical deductibles, or hearing aid replacements.

Pay attention to the new 2026 earnings limits if you're working and claiming

Working before full retirement age (FRA) can trigger the earnings test. In 2026, the limit is $24,480 per year, or $2,040 per month. Above this limit, the SSA withholds $1 for every $2 you earn. In the year you reach FRA, there is a higher limit of $65,160 or $5,430 per month, and withholding changes to $1 for every $3 you earn above that limit. And it only counts on earnings before the month you reach your FRA.

Plan hours, bonuses, and start dates around these numbers, and use the SSA calculators to figure out how this affects your benefit long term. If you're getting close to FRA, it may make sense to delay work income until the year you reach FRA, because the limits are higher. And, after FRA, the earnings test ends, so if you want to continue working, you can do so without that extra withholding.

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Bottom line

The 2026 COLA is real money, but it doesn't fully close the inflation gap. So you'll still need to revisit your household budget and your retirement plan and make reasonable adjustments. It's important that you also check your tax exposure, review Medicare during Open Enrollment, tweak your autopays, and refresh your income plan for the year ahead.

If you're still working while claiming, keep the updated 2026 earnings limits in mind so the earnings test withholding doesn't catch you off guard. Although you won't see the increase in your Social Security payments until January, it's smart to plan ahead now to maximize your senior benefits and make that extra money work for you in the best way possible.

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