Social Security Cost-of-Living Adjustment (COLA)

Almost every year, Social Security benefits are adjusted for inflation through COLAs (cost-of-living adjustments). Basically, this helps recipients of Social Security and Supplemental Security Income (SSI) cover regular increases in the cost of living (like higher food and housing costs) caused by inflation.

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Each January, retirees, people with disabilities and others who receive Social Security benefits usually see an increase in their payment compared to December. This means they’ll have a little more cash in their budget to make ends meet.

How Much Is Social Security Increasing in 2026?

Before the COLA for 2026, the average monthly Social Security benefit for a retired worker was $2,015. The COLA bumped that average up by 2.8% to $2,071 (an increase of $56 per month).² We’ll do the math for you: That’s a total annual benefit of $24,852 in 2026.

An extra $56 every month might seem nice, right? But thanks to inflation (which was 2.7% in December 2025), you shouldn’t think of the COLA as a raise.³ After all, the COLA increase isn’t meant to be a stimulus check. It’s meant to help people on Social Security keep some of their purchasing power, which is basically how far your dollars go to cover the price of everyday needs.

What Are Cost-of-Living Adjustments (COLAs)?

In a nutshell, a Social Security cost-of-living adjustment is an annual increase in benefits designed to take away the sting of inflation and help retirees and disabled individuals maintain their purchasing power.

Because of inflation, a dollar is worth more today than it’ll be worth tomorrow. This is one of the main reasons people are motivated to invest well and grow their money.

Once upon a time, Social Security benefit adjustments required legislation passed by Congress (and if you know anything about Congress, you know that could take a while). But in 1975, that all changed. Congress decided that cost-of-living adjustments should be made automatically each year to account for inflation—and that’s the way it’s been ever since.

And to keep everything as fair as possible, COLAs are based on the consumer price index (CPI), an economic tool that measures inflation.

So, what does all this mean? It’s simple: When inflation rises, so does the COLA.

How Have COLAs Affected Benefits Lately?

While 2023 was a big year for Social Security recipients (the COLA was 8.7%—the largest in 40 years), the COLA isn’t normally that high.⁴

Year	2022	2023	2024	2025	2026
COLA	5.9%	8.7%	3.2%	2.5%	2.8%
Monthly Benefit*	$1,6575	$1,8276	$1,9077	$1,9768	$2,0719

*"Monthly benefit" is the average for a retired worker.

Fun fact: The biggest bumps to the COLA were in 1980 and 1981, when recipients received 14.3% and 11.2% increases in their monthly benefits—largely due to a recession and unusually high inflation at the time.¹⁰ In most cases, cost-of-living adjustments are a lot smaller.

And while a COLA can never be negative, it doesn’t always go up. In the aftermath of the Great Recession that hit in 2008, there were several years of low inflation—and in some cases deflation (which happens when there’s a widespread decrease in the price of goods and services). As a result, the COLA was 0% in 2009, 2010 and 2015.¹¹

Medicare Premiums Will Impact Your COLA

If you receive Social Security and you’re enrolled in Medicare Part B (outpatient coverage), your monthly premium is automatically deducted from your Social Security check.

That means you might not see the full amount of the COLA increase in your Social Security checks because of increases to Medicare Part B premiums. For 2026, those premiums increase to $202.90 per month (that’s an increase of $17.90).¹²

Social Security Doesn’t Provide a Secure Retirement

If you’re relying on Social Security alone to get you through retirement, you could end up in a really tight spot. Is it your dream to retire on a couple thousand bucks a month? Probably not!

But a lot of seniors find themselves in that exact spot. More than 17 million Americans 65 and over live on about $30,000 a year. And for more than a third of men (37%) and almost half of women (42%), Social Security makes up at least half their income.¹³

If Congress doesn’t act soon, Social Security is facing a financial shortfall that will keep it from paying full benefits by 2033.¹⁴ The point is, we don’t recommend counting on Uncle Sam to take care of you in your golden years!

That’s why it’s best to save for retirement by building your own nest egg. And the best way to do that is to get out of debt, then invest 15% of your gross income in tax-advantaged accounts like a 401(k) and a Roth IRA.

Saving for the future is a marathon, not a sprint. With the right plan and the right actions, you can enjoy life now while building wealth and making progress toward your financial goals—like retiring on your terms, not the government’s!

 

This article provides general guidelines about investing topics. Your situation may be unique. To discuss a plan for your situation, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros.