Do retirees feel like a dollar doesn’t quite stretch as far this year?
Each year, the Social Security Administration (SSA) evaluates economic data and issues a cost-of-living adjustment (COLA) intended to account for rising living expenses. The COLA from this past October was 2.8%, bumping the average monthly retirement benefit to $2,071 as of January 2026, a $56 increase.
But the world has changed a lot since October, and it’s fair to wonder whether your Social Security benefit is actually keeping up with what you’re spending right now.
Image source: Getty Images.
How is the COLA calculated?
The SSA calculates the COLA by evaluating changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The kicker is that the SSA does this by averaging the data for the third-quarter months of July, August, and September, then comparing it to the same period of the prior year. So, the SSA calculated the 2026 COLA by evaluating how the index changed in those three months from 2024 to 2025.
In other words, the COLA depends on a very narrow snapshot of the data from each year. By the time the COLA goes into effect, it will already be several months old. It doesn’t capture fluctuations after the window, such as inflation increasing during the fourth quarter of that year. The data behind the COLA will be over a year old by fall, and living expenses can change significantly in a year.
Rising expenses eat into the COLA
Unfortunately, expenses are soaring across the board, far exceeding the 2.8% of the last COLA evaluation. In January 2026, the standard monthly premium for Medicare Part B rose by 9.7%. That eats up a chunk of a typical retiree’s COLA before it even hits their bank account.
Beyond medical expenses, the cost of living is soaring. According to the Bureau of Labor Statistics, the trailing 12-month cost of various goods and services has risen by these figures (as of April 2026):
- Gasoline: 28.4%
- Electricity: 6.1%
- Shelter: 3.3%
- Food: 3.2%
These are the expenses that many retirees feel the most. It doesn’t take long to chew up that $56 increase that retirees got from the 2026 COLA.
No, your Social Security isn’t keeping up — here’s why
There’s almost no doubt that retirees who depend on Social Security for their core living expenses are feeling the pressure. The numbers clearly show that living expenses have outpaced retiree income since January.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) already faces criticism for potentially understating the real-life cost of living retirees face. So far, the government has resisted changing the COLA formula to use a more accurate index, a decision that’s likely to help keep the program’s costs lower.
Another COLA evaluation will begin in July for the 2027 increase. Any increase helps, but there’s a strong argument that the system is fundamentally flawed, and that helps explain why retirees are struggling to stretch their benefits to keep up with surging living expenses in 2026.
