Social Security Cost of Living Adjustment (COLA) Announced for 2026
After experiencing delays due to the government shutdown, the long-awaited Cost of Living Adjustments (COLA) to Social Security has finally been announced. In a time where there is significant uncertainty surrounding government funding, the adjustment for 2026 is in line with expectations at 2.8%. This is just slightly above the adjustment for 2025, which was an increase of 2.5%, while below the ten-year average of 3.1%. Looking at the last few years of COLA adjustments, we saw significant increases in 2022 (5.9%) and 2023 (8.7%) because of Post Covid Inflation. It is a positive sign for the economy that these adjustments, as well as inflation, continue to level out.
So, what do these changes mean to you? A 2.8% increase is roughly equivalent to a $56 increase per month for the average social security recipient, which will be felt by over 7.5 million individuals. These changes will be effective in January of 2026 and will help you maintain your standard of living in retirement as costs rise over the years.
A few important things to keep in mind:
We often get asked how the government’s debt, or in this case, the government shutdown may affect Social Security. The good news is that it will not be affected, as it is funded by payroll taxes and is considered mandatory spending. While the question of national debt and government shutdown may still cause apprehension, Social Security and the payments you are expecting are here for the time being.
COLA increases only impact those who have already started taking benefits. These adjustments are different from the increases you receive for delaying collecting benefits, which you can do until age 70. Those increases, which are equal to about 8% per year, remain the same despite the COLA announcements each year.
While the COLA increases are designed and are helpful in counteracting inflation, it is not enough to rely on it and abandon your retirement savings plan. The increases should be looked at as bonuses to your retirement funds, not a source of income as they are unreliable.
The decisions surrounding Social Security can be complicated and are unique to each and everyone's financial situation. If you are already collecting, you should expect to see these increases in the new year. If you are not collecting yet, or have any questions about this process, please use us as a resource so we can navigate these decisions together. We are here to help!
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