Seniors are increasingly reliant on Social Security to make ends meet in retirement. In the most recent edition of an annual Gallup poll, 62% of retirees said the program is a major source of income for them. That's the pollster's highest reading in its 24-year history of conducting the survey.
As such, the annual cost-of-living adjustment, or COLA, is an important part of budget planning for many seniors. At the start of every year, the Social Security Administration (SSA) increases everyone's retirement benefit by a small amount to account for inflation during the previous year. And when inflation remains relatively high, as it has for the last few years, those adjustments can be pretty substantial.
Image source: Getty Images.
Here's how the COLA affected the average retiree in January
The annual COLA calculation is based on a standard measure of inflation, the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W). It's published monthly by the Bureau of Labor Statistics and tracks the prices of over 200 goods and services across various markets in the U.S.
To calculate the COLA, the SSA takes the average increase in the CPI-W reading throughout the third quarter of the calendar year. That becomes the adjustment for Social Security benefits paid out starting in the following January.
For 2026, the COLA is 2.8%. That's a slight increase from the prior year, which saw benefits increase 2.5% due to inflation.
The COLA affects benefit payments for everyone eligible for Social Security in the prior year, regardless of whether they started collecting benefits. For those who delayed their benefits last year, the COLA will be added on top of the increase in benefits for delaying.
Those collecting retirement benefits in 2025 received an average of $1,960.18 in December, according to SSA data. Applying the 2.8% COLA to that amount resulted in the average retiree receiving an extra $54.89 in benefits last month.
Your Social Security benefit increase may vary
Since the COLA is percentage-based, the actual amount you receive compared to the average could be larger or smaller depending on how much you received in benefits last year. Other factors may also impact how much the SSA deposits in your bank account each month.
The biggest factor for many will be Medicare Part B premiums, which are automatically deducted from Social Security payments for seniors enrolled in both programs. Medicare Part B premiums increased $17.90 per month for most people.
Many seniors may continue to feel the pinch of inflation on their budgets, despite the 2.8% COLA coming in above January's reported 2.4% CPI increase. That's because many of the areas where seniors spend the most -- shelter, utilities, medical care, and food -- continue to climb faster than the overall inflation rate. For the 62% of seniors relying heavily on Social Security, that can lead to feeling like the extra $54.89 per month from the COLA isn't enough.
