Retirement Social Security

How 2026’s COLA Compares to Inflation (And What That Means for You)

How 2026's 2.8% COLA affects your check.

By Katy Willis

Edited by Laura Hohenstein

Updated Nov. 6, 2025

The Social Security Administration (SSA) has set the 2026 cost-of-living adjustment (COLA) at 2.8%. This rise affects roughly 75 million Americans who receive Social Security or Supplemental Security Income (SSI). COLA helps to offset the increase in prices for everyday items and services due to inflation.

However, given that inflation currently stands at around 3%, COLA might not quite cover those expenses, so you may need to make some smart money moves to bridge the gap. 2026's COLA gives some relief against the rising costs of groceries, housing, utilities, and health care, but what that looks like in actual dollars in your bank account varies.

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How COLA is calculated

Every fall, the SSA calculates next year's COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The formula compares the average CPI-W readings for July, August, and September to the same three-month period for the prior year. This is rounded to the nearest tenth of a percent.

Based on this, the 2026 COLA stands at 2.8%.

The CPI-W is an inflation gauge built from the spending patterns of workers, not retirees. This is why many older households can feel that COLA for any given year may not actually reflect their costs, especially those associated with health care and shelter.

Interestingly, the Bureau of Labor Statistics (BLS) also maintains a research price index designed around older Americans, the R-CPI-E. This report reweights categories such as health care and housing more heavily for people aged 62 and above, but it's not currently used to set benefits.

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What 2.8% means in dollars

In January 2026, beneficiaries will see a 2.8% increase in their gross monthly benefit. In late November, you can log into your my Social Security account to see your COLA notice, your new gross amount, any deductions, and your net deposit.

For the average retiree with a benefit amount of $2,015, there's an approximately $56 per month increase, taking their check to $2,071.

If someone with the same average working record retired early at 62, their check will be around 30% lower. So the baseline would sit at around $1,411 before COLA, and from January, they'd see around $1,450.

A retiree who waited to claim until they were 70 with the same average earnings record would have earned delayed retirement credits, giving them a base benefit 24% higher than the average. So, their current gross benefit would be approximately $2,499 before COLA, and around $2,569 from January's deposit onward.

Where inflation stands now and how COLA compares

As of September 2025, inflation for all urban consumers (CPI-U) stood at 3% year over year. That means that the 2.8% COLA is a little under that rate. But it goes deeper than that. For retirees, some critical goods and services are higher than the overall 3% rate.

For example, the shelter index is up 3.6%, food 3.1%, and medical care is up 3.3%. Therefore, while 3% inflation is the overall baseline, depending on your needs, your household inflation can exceed both COLA and the overall 3% inflation baseline.

Because older households spend a larger share on health care and shelter, the CPI-E tends to run a little higher than the CPI-W over long periods. Analyses from the SSA's Office of the Chief Actuary and Congressional researchers generally find that the CPI-E averages about 0.2 to 0.3 percentage points faster than the worker-focused indexes.

Nik Agharkar, Esq, owner of Crowne Point Tax, says, "With the pace of inflation remaining stubbornly high, the cost-of-living adjustment for retirees receiving Social Security is providing less and less of a hedge against the diminishing purchasing power of the dollar.

"The sad truth is that roughly one in five Americans aged 65 and over is still working, and likely will continue to have to work for some time just to maintain their standard of living. And with health care and long-term care costs having grown over 120% since 2000, COLA of about 86% over that same period shows the stark shortfall many seniors are facing.

"A COLA indexed to general inflation simply has not kept pace with the actual expense inflation experienced by many older adults, particularly as they age. Compounding matters is the crisis in our senior population being able to afford medical coverage or long-term care."

He goes on to recommend that seniors try to build a diversified income strategy as a hedge against inflation. This can include delaying retirement where possible, maintaining part-time or flexible work, and adding to an emergency fund specifically for unexpected health care or housing costs.

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Will rising costs and Medicare erase COLA?

For many, the obvious answer is yes. If your gross check is up 2.8%, but your average costs are up 3%, not only will your COLA essentially be absorbed, but there'll still be a shortfall. Health care can be the swing factor. Medicare Part B premiums are typically deducted from Social Security. High premiums or an income-related monthly adjustment amount (IRMAA) reduce the net increase you actually see.

The Centers for Medicare and Medicaid Services (CMS) and the SSA publish each year's Medicare amounts in the fall and include your exact deduction in the online COLA notice. So the best way to know your true 2026 raise is to review that notice in your my Social Security account.

Early reporting in September suggested Part B could rise again in 2026, which would trim some of COLA's benefit for enrollees, though the final number comes from CMS.

"Health care is one of the biggest budget busters in retirement, yet recent research shows 76% of Americans underestimate how much they'll need to cover medical expenses," said Whitney Stidom, vice president of consumer enablement at eHealth.

She advises anyone in or approaching retirement to take advantage of the fall Annual Enrollment period to make sure they select the best plan for their needs and budget.

Bottom line

The 2026 COLA of 2.8% adds about $56 per month to the average retiree's check, or around $672 per year. However, with today's inflation running at around 3% overall and the elements that have the biggest impact on senior finances, such as health care, shelter, and groceries, running even higher than that, for many households receiving Social Security benefits, there will still be a shortfall.

COLA is backward-looking and based on working-age consumers, which is why it doesn't necessarily cover the full increased costs faced by retirees. With the release of the 2026 COLA, it's important to adjust your budget, revisit your retirement plan, consider side income, and diversify your income streams if possible to bolster your finances against unexpected costs and rising inflation.

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