Here’s What Retirees Need To Know

The numbers are in: Retirees who receive Social Security benefits will see their monthly checks increase 2.8% come January 2026.

The Social Security Administration just released the cost-of-living adjustment (COLA), which is meant to reduce the impact that inflation has on Social Security beneficiaries. As of August 2025, the average monthly benefit for retired workers was $2,008 so a 2.8% would result in an extra $56 a month for retirees.

The COLA is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The SSA calculates the COLA by determining the average CPI-W for July, August, and September of the previous year and then the same period of the current year. It then measures the percentage change between those two periods.

Colin Slabach, a clinical assistant professor at New York University School of Professional Studies, points out that since the COLA is pegged to the CPI-W—which tracks the spending habits of workers in urban areas—it may not reflect the price increases that individual retirees get. The CPI-W was 2.9% in September 2025.

Slabach suggests that the CPI-E would be a better index for determining the COLA, as it is based on the spending habits of those aged 62 or older, who typically spend more on expenses like medical care.

“It’s essential to recognize that the historical difference between the two has been minimal, with the CPI-E slightly outpacing the CPI-W,” said Slabach. “However, many people, including myself, believe this will shift as medical care begins to rapidly outpace college tuition. This could create a situation in 10 years where the elderly experience a meaningful, real-dollar decrease in their spending ability because the CPI-W does not accurately reflect their spending habits.”

While the COLA may offer retirees some protection against inflation, it may not keep up with inflation entirely.

A study from the Center for Retirement Research (CRR) at Boston College found that retirees, in particular, were susceptible to the negative effects of inflation, as they no longer work and don’t benefit from wage gains driven by inflation.

Plus, for the retirees who rely on Medicare for health insurance, an increase in monthly Medicare premiums could erode some of the benefits of the COLA.

In fact, the Centers for Medicare & Medicaid Services projects that Medicare part B (medical insurance) monthly premiums will increase more than 11% next year, rising more than $20, from $185 to $206.

Yet there are actions retirees can take to try and reduce the erosive power that inflation has on their budgets.

“And retirees tend to invest more conservatively in fixed-income products that lose value during inflation,” wrote the CRR researchers in the report. “For instance—to the extent possible—they can re-invest the assets held in fixed-income when inflation hits, rather than making withdrawals that lock in large losses.”

Similarly, Bill Shafransky, a senior wealth advisor at MONECO Advisor, suggests that retirees refrain from making their portfolios too conservative.

“Carve off some of your investment portfolio and add some more equity exposure to give you potential of keeping pace or outpacing inflation,” Shafransky said. “You may see more volatility given the higher equity exposure, but data shows the average annual rate of return over time has put the purchasing power back in your lap.”