Why the 2026 Social Security COLA Increase Won’t Be Enough

November

Why the 2026 Social Security COLA Increase Won’t Be Enough

November 3, 2025

In Retirement Savings, Retirement Tips

By Keya

If you’re hoping the 2026 Social Security COLA will help ease the pressure of rising costs, don’t get your hopes up.

The 2026 increase is only 2.8%.¹

With inflation, Medicare premiums, and everyday expenses climbing faster, it won’t go far.

In this post, we’ll help break down what the new COLA really means, why it continues to fall short for retirees, and how you can take control of your financial future with a stronger retirement savings plan.

What Is the Social Security COLA for 2026?

The Social Security Administration has announced a 2.8% cost-of-living adjustment (COLA) for beneficiaries beginning in 2026.

That will raise the average monthly benefit from $2,008 to $2,064 – an increase of about $56 per month, or just under $675 per year.²

While it’s slightly higher than 2025’s 2.5% increase, it still falls short of keeping pace with the actual cost of living for most retirees.

That’s because the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – a formula that tracks inflation based on the spending habits of working Americans.

When prices rise, benefits are adjusted to help retirees keep up.

But here’s the problem: The CPI-W measures inflation based on working households, not retirees.

So, while it captures things like transportation and apparel, it downplays the costs retirees actually feel most – medical care, housing, and utilities – all of which have climbed much faster than general inflation.

Why You Can’t Rely on Social Security Alone in Retirement

Social Security was never meant to replace your full income. And, with rising costs, it’s falling even further behind.

Yet, we see too many people assuming Social Security will be enough to cover their basic needs, only to discover too late that it falls short.

According to a Motley Fool Survey published on October 24 this year, nearly 68% of retirees say the 2.8% COLA won’t cover essential living expenses like healthcare, housing, and food.³

And 54% said they have returned to work or are considering it because their benefits don’t go far enough.⁴

A big reason is healthcare.

AARP projects that Medicare premiums could rise nearly 12% in 2026, from $185 in 2025 to about $206.50 per month. If this happens, it will decrease a large portion of that COLA increase.⁵

That means the average retiree who expects a $56 monthly boost may see just around $30 or less once Medicare is deducted.⁶

Add in the climbing costs of prescriptions, housing, and utilities, and it’s easy to see why Social Security alone will most likely not sustain most retirees for the long haul.

This is where private retirement savings – like your 401(k) and/or IRA – become critical.

Making retirement savings a priority can help close the gap between what Social Security provides and what you’ll actually need.

Unlike Social Security, your retirement accounts give you control over how much you save and how your money grows.

What Are Some of the Smartest Ways to Strengthen Your 401(k) before Retirement?

2026 social security COLA increase

Before the year ends, we recommend you take these strategic steps to help boost your 401(k) retirement savings and improve your long-term financial security.

Max out retirement contributions. Do all you can to contribute as close to the max as you’re allowed. If you are 50 or older, you can take advantage of catch-up contributions, which allow you to contribute more than the 2025 limit of $23,500. For those ages 50 and older, the 401(k) catch-up contribution is $7,500, for a total of $31,000. And if you are between 60 and 63 starting in 2025, you can take advantage of the super-catch up amount, which is an additional $11,250 instead of $7,500.
Get the employer match. Many employers match a percentage of employee contributions to their 401(k) up to a certain portion of the total salary. However, some match employee contributions up to a certain dollar amount. We suggest you contribute enough to get this free money. Here are 4 ways to maximize your company match.
Rebalance your account. Rebalancing can be one of the easiest ways to boost 401(k) savings. Unmanaged allocations may experience larger losses because of down markets. In contrast, they may miss out on growth opportunities during good markets. For this reason, it is typically recommended you rebalance your 401(k) account regularly (or work with professional 401(k) account managers like 401(k) Maneuver).
Don’t borrow or take early withdrawals. Even if you are tempted, avoid pulling funds from your 401(k). Whether you withdraw or take a 401(k) loan, your future may be penalized. Both have consequences for your financial future…mainly preventing your retirement savings from growing tax-deferred.
Cut Unnecessary Expenses. Cut unnecessary expenses today, take all the money you’ve saved, and put it toward your retirement savings. Choose the less expensive option when given a choice. Make wise financial choices today to help enhance your retirement future.
Create Additional Income Streams. Look for opportunities for additional income streams, such as freelance work, part-time jobs, or real estate investments. Every little bit helps.
Consider Delaying Social Security Benefits. It may be financially wiser for you to put retirement on hold. The age at which you stop working affects how much you earn from Social Security. Additionally, the longer you work, the longer your 401(k) has to grow.

Get Help. If you are worried you may be depending on Social Security a little too much, seek help from a professional. They can help you determine what you need to do to improve your annual 401(k) account performance so that you don’t have to rely only on Social Security.

Have questions about your 401(k)? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

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