Social Security beneficiaries are watching closely as the 2026 cost-of-living adjustment (COLA) is projected to give a 2.7% increase in monthly benefits, according to the Senior Citizens League. This is slightly higher than the 2.6% estimate in June and the 2.5% in May.
If the latest forecast is accurate, the average retired worker could see about a $54 monthly raise. But while this sounds positive, there are reasons why this increase may not fully help seniors keep up with real rising costs.
Why is the 2026 COLA estimate increasing?
COLA increases are directly tied to inflation. The Social Security Administration bases adjustments on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), looking at data from July, August, and September each year.
July’s CPI-W was 2.5% higher than a year earlier.
We’ll know August and September’s numbers soon.
The official COLA for 2026 will be announced in mid-October 2025.
The higher the inflation data, the higher the adjustment—but that doesn’t always mean seniors are truly keeping up.
Two reasons why the COLA may not be enough
COLA is meant to protect retirees from losing purchasing power. In theory, if inflation is 3% and COLA is 3%, retirees should break even. But in reality, seniors may still fall behind. Here’s why:
1. The CPI-W doesn’t reflect senior spending
The CPI-W is based on costs faced by working households, not retirees. Seniors typically spend more on:
Healthcare: Outpatient hospital services rose 6.4% in July.
Housing: Costs rose 3.7%, higher than the overall average.
There’s actually another index—the CPI-E, designed to track inflation for the elderly. In July, it showed a 2.9% increase, higher than the CPI-W’s 2.5%. But unfortunately, the CPI-E is not used to calculate COLA.
2. Rising Medicare premiums will eat into COLA gains
Most retirees have their Medicare Part B premiums deducted directly from their Social Security checks. These costs are climbing faster than COLA increases.
In 2025, the standard Medicare Part B premium is $185 per month.
In 2026, it’s expected to rise to $206.50—an 11.6% increase.
This means the average retiree’s $54 COLA raise shrinks to just $33.50 after accounting for Medicare. For lower-income retirees, the hit is even bigger.
Example:
A retiree with $1,400/month in Social Security would get a $37.80 COLA raise.
After the Medicare increase, the net gain would be just $16.
The bottom line on the 2026 COLA
A 2.7% COLA increase may sound like good news, but when combined with higher healthcare and housing costs, most retirees will still lose purchasing power in 2026.
For beneficiaries, it’s important to understand that while COLA provides some relief, it may not be enough to keep pace with real inflation—especially in areas that matter most to seniors. Future retirees should plan accordingly, considering healthcare costs and building extra savings where possible.
