Retirees counting on a big cost-of-living bump next year may want to temper expectations.
Early projections for the 2026 Social Security COLA point to an increase of roughly 2.6% to 2.7%, according to estimates from the Senior Citizens League and several independent forecasters.
That's a noticeable step down from the 3.2% bump retirees received in 2025 and the 8.7% spike in 2023.
For the average retired worker collecting about $1,900 a month, a 2.6% raise works out to roughly $49 more per month, or about $590 a year.
It's real money, but it likely won't feel like it once Medicare premiums and other costs take their bite.
Part B premiums are typically deducted straight from Social Security checks, and those have been climbing faster than the COLA in several recent years.
Here's the part that frustrates people: the COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
That index tracks a basket of goods based on the spending habits of working-age Americans, not retirees.
Older households tend to spend a much larger share of their budgets on healthcare and housing, which have both outpaced general inflation.
Critics have pushed for years to switch to a CPI-E index designed specifically for the elderly, but Congress hasn't moved on it.
The official number won't be locked in until October, when the Bureau of Labor Statistics releases third-quarter inflation data.
Until then, forecasts can shift with gas prices, grocery costs, and rent trends.
If inflation runs hotter than expected this summer, the COLA could come in closer to 3%.
If it cools off, retirees could see something closer to 2.4%.
What can you actually do with this information right now?
First, don't build next year's budget around a number that isn't final.
Second, if you're already collecting, check whether your Medicare Part B premium and any supplemental plan costs are set to rise in January.
A raise that gets eaten by premium hikes is a raise in name only.
Third, if you're still working and planning to claim soon, remember that delaying your claim past full retirement age boosts your monthly benefit by about 8% per year until age 70 — a far bigger lever than any COLA.
Also worth watching: the Social Security trust fund.
Recent trustees reports project the retirement program's reserves could be depleted in the mid-2030s, at which point incoming tax revenue would only cover about 75% to 80% of scheduled benefits unless lawmakers act.
That's not a reason to panic, but it is a reason to treat Social Security as one leg of your retirement stool rather than the whole thing.
The takeaway for households: a modest COLA is better than none, but it rarely keeps pace with the expenses that hit older Americans hardest.
Our view: the annual COLA announcement gets treated like a windfall, when it's really just a partial inflation adjustment.
Final Thoughts
If your budget depends on it, build in a cushion now — because healthcare costs almost always show up before the raise does.