The Social Security annual cost-of-living adjustment (COLA) for 2026 is 2.8%, the Social Security Administration (SSA) announced on Friday, October 24. This is among the smallest COLA increases since 2020, as expected, and follows a 2.5% increase in 2025. According to the SSA, the 2.8% increase will translate to an additional $56 for the average retiree, resulting in an average monthly check of $2,071, up from $2,015 in 2025. Married couples will see an average increase of $88, raising their monthly benefit to $3,208 from $3,120 in 2025.
The 2026 COLA was originally scheduled to be released on October 15 and was delayed due to the impact of the government shutdown. Although the shutdown is ongoing, some employees at the Bureau of Labor Statistics (BLS) were recalled to prepare the September Consumer Price Index (CPI), which is essential to computing the 2026 COLA. CPI was also released on October 24.
The 2026 COLA in context
Although the 2.8% COLA is only 0.3% more than the 2.5% increase in 2025, it isn’t far from the historical average.
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“With current inflation at 3%, and inflation next year a bit less, the COLA should help seniors mostly keep up,” said David Payne, economist for The Kiplinger Letter.
However, some retirees might find this COLA increase lacking. “A 2.8% increase is modest, especially for retirees whose cost increases may be higher in areas such as health care, housing, or other retirement-specific expenses,” Martha Shedden, co-founder of the National Association of Registered Social Security Analysts (RSSA), told Kiplinger.
The COLA has averaged about 2.6% over the past 20 years. It went as low as 0.0% in 2016 amid declining prices, and as high as 8.7% in 2023 when inflation spiked after COVID disruptions.
|
Year |
COLA |
Average monthly benefit |
|
2016 |
0.0% |
$1,360.13 |
|
2017 |
0.3% |
$1,404.15 |
|
2018 |
2.0% |
$1,461.31 |
|
2019 |
2.8% |
$1,502.85 |
|
2020 |
1.6% |
$1,544.15 |
|
2021 |
1.3% |
$1,658.03 |
|
2022 |
5.9% |
$1,825.14 |
|
2023 |
8.7% |
$1,905.31 |
|
2024 |
3.2% |
$1,907 |
|
2025 |
2.5% |
$1,976 |
|
2026 |
2.8% |
$2,071 |
How is the COLA calculated?
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The Consumer Price Index (CPI-W) for Urban Wage Earners and Clerical Workers is the benchmark the SSA uses to determine the COLA, but that is a recent development. Initially, a new act of Congress was required each time benefits were increased. However, the rapid and persistent inflation in the 1970s was quickly eroding the purchasing power of fixed pensions and Social Security benefits. Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975.
The COLA is now determined by the inflation observed in July, August, and September in the CPI-W. The SSA calculates the percentage change between average prices in the third quarter of the current year and the third quarter of the previous year.
This is the formula: (317.265 – 308.729) / 308.729 x 100 = 2.8 percent.
|
Month |
2024 |
2025 |
|
July |
308.501 |
316.349 |
|
August |
308.640 |
317.306 |
|
September |
309.046 |
318.139 |
|
Third quarter total |
926.187 |
951.794 |
|
Average (rounded to the nearest 0.001) |
308.729 |
317.265 |
Some proposals call for the COLA to be based on the Consumer Price Index for Americans aged 62 or older (CPI-E), but they have so far failed. Proponents of using this price index say it reflects the costs incurred by older adults more accurately than the broader CPI-W. Medical expenses, an increasing burden on older adults, are weighted more heavily in the CPI-E than in the CPI-W.
In reality, the COLA is applied not only to retirement benefits, but to disability and survivor benefits. So, a COLA that is geared toward older beneficiaries wouldn’t necessarily address their needs.
Earnings test when you receive benefits while working
Earned income can cost you if you continue to work after claiming Social Security benefits early. In this case, the Social Security earnings test for annual income is applied and reduces your monthly benefit. The SSA temporarily withholds $1 of your benefits for every $2 earned over $24,480 or $2,040 per month for 2026. In a year the worker hits full retirement age, the test is more generous — the worker forfeits $1 in benefits for every $3 in 2026 earnings above $65,160 or $5,430 per month.
Social Security tax wage cap for 2026
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Social Security caps the amount of income you pay taxes on and get credit for when benefits are calculated. The new Social Security tax limit is $184,500 in 2026, up $8,400 from $176,100 in 2025. The tax limit is indexed to inflation, so you can anticipate it will rise again in 2027.
In 2025, the tax limit was $176,100, and it rose by $7,500 from $168,600 in 2024.
How much you need to earn to qualify for Social Security credits in 2026
You must earn a minimum of 40 Social Security credits to qualify for retirement benefits, and you are allowed to earn up to four credits per year. The SSA cannot pay you benefits if you don’t have enough credits.
The SSA also uses the number of credits you’ve earned to determine your eligibility for retirement or disability benefits, Medicare, and your family’s eligibility for survivor benefits.
To earn one credit in 2026, you must have wages and/or self-employment income of $1,890, and you must earn $7,560 to get four full credits. In 2025, you only needed to earn $1,810 to earn a credit, $80 less than what you needed to earn in 2026. This amount increases annually, so it will rise in 2027.
How you can increase your monthly Social Security benefits
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Collecting benefits before your FRA can lead to a permanent decrease in your benefits. If you were born in 1960 or later, taking benefits at 62 would reduce your check by 30% and spousal benefits would be reduced by 35%. The maximum benefit for a spouse is only 50% of the benefit the worker would receive at FRA. The percentage reduction for the spouse would be applied after the automatic 50% reduction.
You can use your retirement savings to postpone receiving Social Security and create a ‘Social Security bridge’ to help reduce early-claiming penalties and collect a higher monthly income. Whether you have an IRA or 401(k), both offer strategies to help you delay claiming your benefits until your FRA, if not later.
