Social Security 2026 COLA: How Much Increase Retirees Can Expect — And Why Many Might See Less in Their Checks

For millions of American retirees, the next few months will be a waiting game. All eyes are on the Social Security Administration as it prepares to announce the 2026 Cost-of-Living Adjustment (COLA), the annual top-up that could mean the difference between financial comfort and a tighter budget.

The adjustment, which is based on inflation data from July to September 2025, will affect more than 70 million beneficiaries from January next year. While early estimates suggest a modest increase of around 2.6% to 2.7%, experts are sounding a note of caution. Rising Medicare premiums and taxes could mean that for many, the promised boost might not feel like a boost at all.

How Much Increase Retirees Can Expect

Current projections from several leading organisations indicate that the 2026 COLA will settle in the range of 2.6% to 2.7%.

The Senior Citizens League (TSCL), a non-partisan advocacy group for older Americans, has revised its forecast several times this year and now expects an increase of around 2.7%. The Social Security Trustees Report, released in 2025, shows a similar outlook, which is supported by analysts.

If these predictions hold, the average Social Security benefit could rise by approximately $54 (£40) per month, or about $650 (£480) annually.

The official COLA will be confirmed in October 2025 once the Bureau of Labor Statistics publishes the final inflation data for the third quarter. The annual increase aims to protect the purchasing power of beneficiaries as prices fluctuate across the economy.

What Is Driving the 2026 Estimate

The Social Security COLA is determined by changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index tracks inflation for goods and services typically purchased by working households. The final adjustment rate will be decided by comparing the average CPI-W for July, August, and September 2025 with the same period in 2024.

Economists note that inflation pressures have eased compared with the post-pandemic surge of 2021 and 2022, leading to a smaller expected increase. However, volatile energy prices and rising healthcare costs could still influence the final figure.

Analysts also warn that a potential federal government shutdown could delay the release of September's inflation data, which may postpone the official COLA announcement.

Why Many Beneficiaries Might See Less in Their Checks

Despite the projected increase, many retirees may not feel a significant boost in their finances. One major factor is the annual rise in Medicare Part B premiums, which are deducted directly from Social Security payments.

According to Kiplinger, these premiums could absorb as much as 40% of the COLA increase for many beneficiaries.

Tax implications may also limit the gains. As benefits rise, some retirees could find themselves pushed into higher tax brackets, reducing their overall income.

Furthermore, experts argue that the CPI-W does not accurately reflect the spending habits of older adults. Retirees tend to spend a larger portion of their income on healthcare, housing, and utilities: categories that have seen faster price growth than the general inflation rate.

As a result, the real purchasing power of the COLA adjustment may not fully keep pace with seniors' living costs.

Other Social Security Changes Coming in 2026

The upcoming year will also bring several structural changes to Social Security alongside the new COLA. The Full Retirement Age (FRA) will reach 67 for people born in 1960 or later, completing a gradual phase-in that began in 2000.

The maximum taxable earnings cap is expected to rise to $183,600 (£136,000), meaning higher-income workers will contribute more to the system.

In addition, the earnings limit for those receiving benefits before reaching their full retirement age will increase, allowing retirees to earn slightly more before facing benefit reductions. The Social Security Trustees Report also reaffirmed concerns about the programme's long-term solvency, projecting that its trust fund could be depleted by 2034 without legislative reform.