Social Security benefits will increase 2.8 percent next year, one of the smallest cost-of-living adjustments in recent years, as inflation remains moderate despite a late-year uptick in prices.
The Social Security Administration said Friday the adjustment will raise the average monthly benefit for retired workers to about $2,071 from $2,015 this year—an increase of roughly $56 starting in January. The boost applies to nearly 71 million Americans receiving retirement and disability payments, while 7.5 million Supplemental Security Income beneficiaries will see their increase reflected on December 31.
The 2026 increase is slightly larger than this year’s 2.5 percent raise but still marks the second smallest adjustment since 2021, underscoring how far inflation has fallen from its pandemic-era highs. The annual COLA reached 8.7 percent in 2023, the highest in four decades, before slipping to 3.2 percent in 2024.
The cost-of-living adjustment is based on changes in the Labor Department’s CPI-W index, which measures price movements from July through September. While inflation cooled for most of the year, higher costs for food, electricity, and used vehicles contributed to a modest rebound.
Limited Relief for Retirees
Roughly 40 percent of Americans age 65 and older rely on Social Security for at least half of their income. Economists say that even modest inflation can erode the purchasing power of retirees, many of whom hold savings in cash and bonds. A separate inflation gauge designed to reflect older consumers’ spending patterns—the CPI-E—has recently run slightly hotter than the CPI-W used for COLA calculations, largely due to heavier weighting for medical care.
Next year’s benefit gains may be partly offset by a projected rise in Medicare Part B premiums of about $21.50, to $206.50 a month, according to the program’s trustees. Those premiums are typically deducted directly from Social Security checks.
Tax and Trust Fund Changes
The maximum amount of wages subject to Social Security payroll taxes will increase to $184,500 in 2026, up from $176,100 this year.
Social Security’s trustees have warned that the program’s combined trust funds could be depleted by 2034, at which point tax revenue would cover about 81 percent of promised benefits unless Congress acts.
The administration said the annual adjustment is meant to keep payments aligned with current economic conditions and preserve retirees’ purchasing power, even as the size of the increases continues to shrink.
Read the full article here