Introduction to Social Security Benefits
Retirees are likely to see only a modest rise in Social Security benefits next year when the Social Security Administration (SSA) announces the 2026 cost-of-living (COLA) increase in the fall. The COLA, which takes into account year-over-year percentage changes in a subset of the Consumer Price Index (CPI), determines the increase in the checks of over 72.5 million Americans who receive Social Security benefits and Supplemental Security Income (SSI) payments.
Understanding the COLA
In 2025, the COLA was 2.5%, resulting in an average monthly benefit increase of approximately $49. The increase for 2026 isn’t shaping up to be much larger. The latest projection is for an increase of 2.6% year-over-year, a figure 0.1% higher than last month’s rate. The Consumer Price Index (CPI) for all items rose 2.9% from December 2023 to December 2024. The COLA came in slightly lower because it only takes into account the inflation rates for July, August, and September (the third quarter) compared to the same period of the previous year.
2026 COLA Projections
The Senior Citizens’ League (TSCL) has raised its prediction from 2.5% in May to 2.6% in June, based on creeping inflation rates. The TSCL has been steadily raising its estimated rate by .1% every month since its estimate for February, which came in at 2.2%.
Projected COLA Rates
| The following table shows the projected COLA rates for 2026: | Month | Projected COLA | CPI rate |
|---|---|---|---|
| July | 2.6% | 2.6% (released in July for June) | |
| June | 2.5% | 2.2% (released in June for May) | |
| May | 2.4% | 2.1% (released in May for April) | |
| April | 2.3% | 2.2% (released in April for March) | |
| March | 2.2% | 2.7% (released in March for February) | |
| February | 2.3% | 3.0% (released in February for January) | |
| January | 2.1% | 2.8% (released in January for December) |
Impact on Social Security Beneficiaries
The average Social Security monthly check for retired workers was $2,005.05 for June 2025, according to the Social Security Administration’s (SSA) Monthly Statistical Snapshot. Using that amount for illustrative purposes, a COLA of 2.6% would result in an average monthly increase of $52.13 or an annual average increase of $625.58. Social Security beneficiaries are in a catch-22 situation; there is only a big COLA when inflation is high, but low inflation, which is good for fixed incomes, means a low COLA.
The "Hold Harmless" Provision
A special rule called the “hold harmless provision” protects Social Security benefit payments from decreasing due to an increase in the Medicare Part B premium. The Part B premium for 2025 is $185, which is $10.30 higher than the 2024 premium. The provision is meant to protect low-income Social Security recipients from having their payments decrease from one year to the next because the increase in the Medicare Part B premium would be more than the COLA.
Eligibility for the Hold Harmless Provision
To qualify for the hold harmless provision, you must:
- Receive Social Security benefits or be eligible to receive Social Security benefits for November and December 2024
- Have your Medicare Part B premiums automatically deducted from your Social Security payments every month
COLA Computation
The CPI-W is used as the benchmark rate to compute the annual COLA. Its market basket reflects the expenditures of urban households that earn more than half their income from clerical and hourly wage jobs. It covers approximately 29% of the nation’s population. To calculate the inflation index, price changes are averaged with weights representing their importance in the spending of the particular group.
Example of COLA Computation
| The following table shows how the CPI-W numbers were used to determine the 2025 COLA: | 2023 | 2024 | |
|---|---|---|---|
| July | 299.899 | 308.501 | |
| August | 301.551 | 308.640 | |
| September | 302.257 | 302.257 | |
| Third quarter total | 903.707 | 926.187 | |
| Average (rounded to the nearest 0.001) | 301.236 | 308.729 |
Why COLA Projections Matter
COLA increases, small and large, impact your ability to pay your expenses and save for a rainy day. While the current projection is 0.1% more than last year, there are only three months until the official COLA is announced. As Medicare Part B premiums are estimated to be going up by over 11%, this sharp increase can take a big bite out of your COLA raise.
Conclusion
In conclusion, the 2026 COLA projection is expected to be modest, with a projected increase of 2.6%. This increase will impact Social Security beneficiaries, who may need to adjust their spending and savings plans accordingly. The "hold harmless" provision will protect some beneficiaries from decreasing payments due to increases in Medicare Part B premiums. Understanding how the COLA is computed and why it matters can help beneficiaries make informed decisions about their finances.
