Why the 2.8% Social Security COLA May Not Cover Your Real Costs in 2026

Earlier this year, Social Security recipients saw their benefits increase 2.8%. That cost-of-living adjustment, or COLA, was a slight improvement from the 2.5% raise Social Security benefits got in 2025.

But so far, that 2.8% COLA doesn’t seem to be holding up very well. Here’s why.

Medicare Part B costs rose a lot

Seniors enrolled in Social Security and Medicare at the same time pay their Part B premiums out of their benefits directly. So when there’s a big rise in the cost of Part B, COLAs tend to get whittled down.

This year, the standard monthly Part B premium rose by $17.90. Meanwhile, this year’s 2.8% COLA was expected to raise the average monthly retirement benefit by $56. Given the large increase that applied to Part B, roughly one-third of the typical Social Security recipient’s COLA was knocked out right off the bat.

Rising oil prices are leading to higher costs

The Iran conflict spurred a major uptick in oil prices that’s been hurting consumers. Not only has there been more pain at the pump, but higher transportation costs have meant more expensive groceries and other household staples.

Of course, there was no way to predict that oil prices would surge back in October, when this year’s Social Security COLA was announced. But that’s an inherent problem with COLAs: Social Security COLA aren’t predictive. Rather, they’re a lagging indicator.

In other words, COLAs are based on past data. But when costs rise at a faster pace than expected, benefits can easily lose purchasing power.

Social Security COLAs are specifically based on third-quarter inflation data. But a lot has changed since then, and this year’s COLA doesn’t reflect that.

That’s also not something that’s going to change unless lawmakers switch up the COLA formula. What’s happening this year could easily happen repeatedly.

Don’t rely on Social Security COLAs to improve your finances

If you’re collecting Social Security or are planning to soon, it’s important to understand that COLAs often do a poor job of helping retirees keep pace with rising costs. The solution? Try to have retirement income outside of Social Security.

If you’re able to bring a nice nest egg into retirement, you can withdraw from your IRA or 401(k) to supplement your monthly Social Security checks. You can also look at other options, such as part-time work or renting out space in your home, as ways to boost your income beyond what Social Security pays you if the window to build savings has largely closed.