• More than 51 million American retirees receive Social Security benefits.
  • The Social Security Administration just announced its 2026 cost-of-living adjustment (COLA), and it’s higher than expected.
  • Retirees will get a monthly pay bump, but inflation may still outpace it in key spending categories.

Anyone who has spent decades working and contributing to Social Security must wonder how much money they’ll take home every month once they reach retirement age.

It’s not a simple calculation.

To arrive at your monthly benefit, the Social Security Administration (SSA) adjusts your income history into current dollars, called “indexed earnings.” (There are annual limits the SSA will consider, however — $184,500 for 2026 — so the calculation isn’t quite as straightforward as it might seem.)

Once the SSA has calculated your indexed earnings, they add up the top 35 earning years and then divide that total by 420 (12 months x 35 years = 420). The final number is your monthly indexed earnings. 

The average monthly Social Security payment for retirees in 2025 is $2,015, according to the SSA.

Social Security recipients will see a small cost-of-living increase in 2026.

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Social Security Administration announces cost-of-living increase for 2026

The SSA just confirmed that benefits will increase 2.8% in 2026, marking the latest cost-of-living adjustment (COLA) meant to offset inflation.

That translates to an average of about $56 more per month, for a total average payment of $2017, for retirees.

Any increase is welcome, but many finance experts say it won’t stretch far enough. This marks the second straight year of moderate increases following the record-breaking 8.7% hike in 2023.

While the 2026 COLA is slightly higher than this year’s 2.5% adjustment, it remains below the decade-long average of roughly 3.1%.

How the 2.8% Social Security COLA was calculated

Each year, the SSA bases its COLA on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

For 2026, the CPI-W rose between 2.7% and 2.9%, reflecting cooling inflation compared with pandemic-era peaks.

In real terms, a retiree currently receiving $2,000 per month can expect about $2,071 starting in January.

Social Security is a promise kept. The annual cost-of-living adjustment ensures benefits reflect today’s economic realities and continue to provide a foundation of security.

SSA Commissioner Frank J. Bisignano

Why many retirees say the 2026 Social Security COLA is not enough

Even as inflation slows, many retirees argue that the COLA doesn’t fully capture how prices are rising for older adults.

Seventy-seven percent of Americans over 60 believe a 3% increase “isn’t enough” to cover growing expenses, according to a recent AARP survey.

Related: Social Security’s 2026 COLA increase hangs on key data

That’s because the CPI-W measures costs for working households — not retirees — and doesn’t reflect categories that disproportionately affect seniors.

Health care costs, for example, rose around 4% year over year, and energy prices have jumped sharply in several regions. Rent and grocery prices also remain elevated.

One retiree told the Associated Press that her rent rose $400 in two years, while her food budget “barely stretches” from month to month.

Social Security COLA: essential numbers retirees need to know

  • COLA increase: 2.8%
  • Average monthly increase: about $56
  • Effective date: January 2026 (SSI payments begin Dec. 31, 2025)
  • Taxable maximum earnings: $184,500
  • Number of affected beneficiaries: About 71 million

For federal retirees under the Federal Employees Retirement System (FERS), the increase may be slightly smaller — capped at 2% — due to a “diet COLA” formula that limits growth when inflation is low, according to the Federal News Network.

Will the 2026 COLA cover inflation increases?

Financial experts say retirees should review their budgets now to understand how far the increase will go.

While an extra $50 to $60 a month offers some breathing room, it’s unlikely to offset higher costs in health care, housing, and utilities.

“When you consider that Medicare Part B is deducted from Social Security benefits, and Part B is going up by $206.50 per month, the 2.8% COLA won’t really offset the increase in the cost of living for retirees,” explains TheStreet’s former Editor & Publisher, Retirement Daily Robert Powell.

The 2026 COLA also comes amid renewed discussion about the long-term health of the Social Security Trust Fund. Without legislative changes, the fund could face shortfalls in the next decade, potentially triggering automatic benefit reductions.

Analysts stress that COLA adjustments protect purchasing power, but don’t fix deeper, systemic funding issues, as reported by the Washington Post.

Beneficiaries can expect to receive official benefit notices in December and view updates through their “my Social Security” account online. Every dollar helps — but it may still be hard for retirees to keep up with the rising cost of living.

Related: Millions of older Americans need to know these Medicare changes