An Increase in Living Costs for Social Security Beneficiaries in 2026
Next year, recipients of Social Security will experience a 2.8% cost-of-living rise. This increase will mean an extra $56 per month on average for retirees.
Starting in January, the new benefits will go into effect for almost 71 million people receiving Social Security. Moreover, close to 7.5 million individuals benefiting from Supplemental Security Income will start receiving the heightened payments towards the end of the year.
The Delay of the Announcement
The announcement of the increase was originally scheduled last week but was postponed due to the shutdown of the federal government.
How the Cost-of-Living Adjustment is Funded
The cost-of-living adjustment, or COLA, is funded through payroll taxes collected from both workers and their employers. This financing applies up to a specific annual salary, which is set to rise from $176,100 in 2025 to $184,500 in 2026.
In the past, there have been significant adjustments to the COLA. In 2023, there was a record 8.7% increase due to 40-year-high inflation. The following year, the benefits increased by 3.2%, and in 2025, there was a 2.5% boost. The comparatively smaller rise for 2026 is a reflection of inflation slowing down.
Not All Recipients Are Happy with the Increase
Some seniors feel that the cost-of-living adjustment won't sufficiently cover their daily expenses. One retiree in South Carolina stated that the increase doesn't match the current affordability crisis. Over the past two years, her rent alone has increased by $400 per month.
She also noted that costs for items such as auto insurance and food have all gone up. Surveys show that she is not alone in her concerns. Only 22% of Americans over 50 believe that a COLA of approximately 3% is enough to keep up with rising costs. A whopping 77% disagree, regardless of their political affiliations.
Even with the inflation-adjusted boost in income, many older adults still face challenges covering basic expenses, according to the head of a large senior organization.
Recent Upheavals in the Agency
The Social Security Administration has faced several challenges over the past year. Thousands of workers were let go as part of an effort to reduce the size of the federal workforce. There have also been concerns about the future of the program due to contradictory statements made by officials.
Efforts to Improve Benefits for Seniors
The Social Security Administration is also dealing with a looming bankruptcy date. The trust funds that cover old age and disability recipients are predicted to run out by 2034, at which point only 81% of benefits will be payable.
Despite these challenges, recent administrations have implemented new benefits for retirees. One administration provided tax relief for many seniors through a temporary tax deduction for those aged 65 and over. However, this doesn't apply to the lowest-income seniors who don't pay taxes on Social Security, those who claim their benefits before they reach age 65, or those above a certain income threshold.
In contrast, another administration repealed two federal policies that had been limiting Social Security payouts for approximately 2.8 million people, many of whom are former public workers. However, these measures have sped up the insolvency of the benefits program.
As a result, there is a growing urgency among policymakers to work towards broader reforms to ensure the long-term solvency of Social Security, particularly for low-income seniors.