There was big news coming out of the Social Security Administration (SSA) on Friday. The federal government agency announced that Social Security recipients will take home an additional 2.8% in their monthly benefits starting in 2026. However, many recipients say that the boost is not nearly enough to account for the recent increase in the cost of living.

Social Security COLA Set at 2.8% for 2026

While the Social Security payment increase of 2.8% is slightly larger than the 2.5% provided in 2025, the percentage is still smaller than what recipients saw in prior years when inflation was out of control. According to the SSA, the average monthly payment for retired workers will jump by about $56 in January. This translates to an average monthly payment of $2,071 beginning in January.

There are about 71 million Americans who receive monthly benefits from the SSA. This number includes retirees, those with disabilities, and individuals such as minors receiving survivors' benefits. In total, there are about 75 million Americans who receive either standard Social Security payments or Supplemental Security Income (SSI) benefits from the SSA.

The government provides this annual cost-of-living adjustment (COLA) every year using an inflation metric gleaned from the third quarter of the preceding year. Because inflation was so high in 2022, the 2023 adjustment came in at a massive 8.7%. The COLA increase was originally scheduled to be announced last week; however, officials had to delay the announcement due to the ongoing federal government shutdown.

The Consumer Price Index (CPI) increased by 3% in September compared to a year ago. This announcement by the Bureau of Labor Statistics was also released on Friday, providing a corresponding metric to the COLA number.

Unfortunately for many retirees, a large majority of the social security increase will be negated by the anticipated jump in Medicare Part B premiums. This adjustment is expected to be released in November. Experts estimate that these health insurance premiums will increase by about $25 when compared to this year. The average Medicare Part B premium in 2025 is $185, according to the latest Medicare trustees report. This predicted increase would translate to about twice the jump seen in 2025.

This means that the anticipated higher Medicare premium would take away about half of the expected increase in Social Security benefits, erasing the overall boost that seniors enjoy. Advocacy groups warn that some seniors will notice that the premium increase for Medicare will completely negate the COLA.

Complaints About COLA Amount

Recipients of Social Security have long maintained that COLA does not keep pace with actual living expenses. This lines up with a report last year from The Senior Citizens League. The report found that social security benefits lost 20% of their purchasing power between 2010 and 2024. This means that retirees who began drawing on benefits in 2010 would need an additional $370 a month, on average, to make up for the lost value.

According to the SSA, the annual increase of benefits over the last decade has come in at an average of 3.1%, putting this year's COLA on the lower end. AARP has been a voice in advocating that the COLA formula be changed to better reflect the true cost of living for seniors, a demographic that generally bears the burden of higher health care expenses when compared to the average American.

According to AARP, roughly 40% of older Americans use Social Security payments as their primary source of income. The smaller COLA means that millions of seniors will need to turn to other types of assistance programs to make ends meet.

Social Security is primarily funded through a payroll tax of 12.4% on most wages. The total percentage is split evenly between employers and workers. Self-employed workers are responsible for paying the entire 12.4%.

The Social Security tax is applied to earnings up to a pre-designated threshold. This maximum will increase from $176,100 in 2025 to $184,500 in 2026. The revenue generated by this tax is put in the pot for Social Security payments for all current recipients. Any excess money goes into two trust funds. One of these funds is designated to pay out retirement and survivors' benefits, while the other fund pays disability benefits.

Looking for stories that inform and engage? From breaking headlines to fresh perspectives, WaveNewsToday has more to explore. Ride the wave of what’s next.