More than 70 million Social Security recipients will get a 3.6% pay raise next year, the Social Security Administration said.
The 3.6% cost-of-living-adjustment is up from 2.8% in 2026 and the largest since the 8.7% COLA increase in 2022, when inflation reached a 40-year high. The latest data show annual inflation in September was 3.7%, primarily driven by a 5.2% jump in energy prices. Excluding energy and food, the so-called core inflation rate was 2.6%.
Annual COLAs are meant to help beneficiaries, mostly seniors, keep up with inflation and maintain the same standard of living, but most recipients say they’ve fallen short, according to AARP, a nonprofit, nonpartisan advocate for people aged 50 and older. Only 23% of 50+ adults say that a COLA around 3.5% feels like it keeps up with rising prices, an AARP survey of 1,023 adults age 50-plus in September showed.
“There’s a lot on the line financially right now for older Americans: One in five have no retirement savings, and more people feel financially insecure this year than last,” said AARP Chief Executive Myechia Minter-Jordan. “That makes Social Security’s cost-of-living adjustment critically important. It helps millions of Americans keep up with rising costs for groceries, routine bills, health care and other everyday expenses.”
How many dollars is a 3.6% COLA worth?
A 3.6% COLA means that starting in January, the average benefit check of $2,087.52 will rise to $2,162.67 each month, AARP said. That’s an additional $75.15 per month, or $901.81 annually.
But Mike Boshardy, founder and chief executive of Medicare plan comparison site The Medicare Pocket Protector, noted most Americans will actually see less than that each month.
“The COLA is a catch-up for prices that already went up, and if you’re on Medicare it’s a catch-up with a hole in it, because Part B comes out of your check before you ever see the money,” he said. “So the headline number isn’t your number. Your number is the COLA minus the Part B increase, and for the average retiree next year that’s roughly $70 to $75 in, $6.60 out, call it $64 to $68 of actual raise.”
The Centers for Medicare and Medicaid Services (CMS) is expected to announce within the next few weeks 2027’s Medicare Part B premium, which covers outpatient care, doctors’ services, durable medical equipment and preventive services. The 2026 Medicare Trustees Report predicted the standard monthly premium at $209.50, up $6.60, or about 3.25%, from $202.90 this year.
Why isn’t COLA enough?
COLA is calculated using the average July through September inflation rate that tracks what working households in big cities spend compared to last year. That’s the problem, said Tim Grimsditch, managing director at the AI-enabled financial advice platform Unbiased.
COLA “reflects the spending patterns of urban wage earners rather than retirees,” he said. “Older households spend proportionally more on health care, which tends to rise faster than the overall basket. That’s why advocacy groups have pushed for a seniors-specific index for years, and why a headline increase can still leave people feeling squeezed.”
The health insurance seniors buy isn’t even properly reflected in COLA, Boshardy said.
“Medicare premiums barely register in it – they’re set by law once a year, not measured at the store,” he said. “That’s how Part B jumps 9.7% while the inflation index says medical care went up 1.6%. The one bill that’s unique to retirees is the one the formula barely sees, which is why folks feel behind even in a big COLA year.”
Premiums on standalone Part D prescription drug plans are also expected to jump when CMS announces 2027 Medicare premiums. CMS ended a subsidy program to insurance companies for standalone Part D drug plans that has helped keep enrollees’ premiums in check.
“Without the Part D pilot program’s increased subsidies to bring down premiums, this is likely to mean higher costs will be passed on to Medicare beneficiaries,” said Mary Johnson, an independent Medicare and Social Security analyst. “It will be more important than ever to watch for changes and to compare options during Medicare Open Enrollment Oct. 15 to Dec. 7.”
Additionally, COLA lags inflation, said Scott Siff, founder and chief executive of Pivoters, a job-matching platform geared towards 55+ workers.
When this new COLA starts in January, it’s “already addressing historical inflation,” he said. “Retirees have already been forced to fund these extra inflated expenses for around 18 months before they receive the catch-up in their benefits. If you’re one of the people living solely off of Social Security, this isn’t going to help you to get ahead. It’s simply putting things back to where they were in 2025.”
What should COLA be?
Seven in ten adults age 50-plus said an increase between 5% and 8% would be sufficient to help Social Security recipients afford everyday expenses, AARP’s survey showed.
“Yet, special interests in Washington still want to weaken or eliminate the COLA, which would amount to cutting tens of thousands of dollars for middle-class seniors,” Minter-Jordan said.
The trust fund that supplements incoming payroll taxes to pay monthly Social Security benefits is expected to run dry by the end of 2032, according to the program’s trustees. When that happens, the law requires benefits to be reduced by an estimated 22% to ensure the program’s costs do not exceed its revenues.
Congress and others have suggested ways to avoid predicted benefits cuts, though none have gotten far towards becoming law. Proposals include a “flat-rate” COLA that would give all Social Security recipients the same dollar amount increase each year based on benefits of those in the 20th percentile and a $100,000 annual Social Security benefits cap for couples.
However, “proposals that focus on capping Social Security don’t address the problem in front of Congress: ensuring every American gets every dollar they have earned,” Jenn Jones, vice president of financial security and livable communities at AARP, said in a statement.
What if COLA isn’t enough?
Americans should try not to rely on Social Security to fund their retirement, advisers said. They should take control of their finances, save, invest and return to work if they must, advisers said.
“Social Security was never designed to be a sole retirement income,” Grimsditch said. “Relying on it alone leaves people exposed to exactly this – an annual number set by a formula, outside their control. Retirement income ideally comes from several places: workplace plans like 401(k)s and 403(b)s, IRAs, personal savings and investments, and in some cases an employer pension or annuity.”
If you’re still working, check to see if your employer offers matching contributions and you’re capturing all of it, he said. If you can afford to increase your own contribution, do so. “Small increases compound over a long career,” he said.
Or consider working “at least some,” Siff said. “Even a part-time job or seasonal work can really help. Not only is the extra income helpful, but continuing to work provides structure, social connection and purpose – all of which are shown to help you live a longer, healthier and happier life.”
Ultimately, “a bigger COLA is better than a smaller one,” Grimsditch said. “But a comfortable retirement depends on the parts you control, not the annual adjustment to the part you don’t.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
Reporting by Medora Lee, USA TODAY / USA TODAY
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