The Social Security Administration just announced a 2.8% cost of living adjustment for 2026. That means the average retiree will see about $56 more per month from 2008 to $264. But here’s the catch. That increase might already be wiped out before you ever see it. In today’s video, I’ll break down what the 2026 COLA really means for your income, why it’s not keeping up with your actual expenses, and how to protect your purchasing power going forward.
I’m Hunter Brockway with Boca Retirement Strategies, where we help pre-retirees and retirees simplify Social Security, taxes, and retirement income planning so you can retire confidently with less stress and more money. Social Security beneficiaries will receive a 2.8% COLA beginning in January of 2026. The average monthly benefit will rise from $208 to $264. about 7.5 million Social Security recipients will see increased payments starting December 31st, 2025. Now, a 2.8% raise sounds decent, especially compared to the 2.5% increase last year, but it’s actually below the long-term average inflation rate for essentials.
To put it in perspective, 2022 saw the largest COLA in 41 years, 8.7%. The 2026 adjustment ranks 29th out of 51 colas since 1975. And while 2.8% 8% is technically above the average for this decade. It’s not enough when everyday costs are still rising much faster, particularly housing, healthcare, and groceries, which are all major parts of retirees budget. The big reason, the COLA is based on CPIW, the consumer price index for urban wage earners and clerical workers. That’s not you. It’s a measure designed around younger working adults, their gas, their transportation, their apparel, spending, not retirees actual costs.
Meanwhile, groups like the Senior Citizens League have pushed for a switch to the CPIE, the consumer price index for the elderly, which weights healthcare and housing more heavily. If CPIE were used instead, your annual colas would have averaged around 0.2 to 0.3% higher per year, compounded over time. Even this modest increase could vanish quickly. Here’s why. Medicare PartB premiums are projected to jump from $185 to over $26 in 2026. That’s a $21 increase, nearly the largest in program history.
Some Part D prescription drug plans could rise as much as $50 per month. That means a big chunk or all of that $56 raise could be absorbed by Medicare alone. As Mary Johnson, a longtime Social Security policy analyst said, the COLA can’t keep up when premiums jump at record levels. According to the Senior Citizens League, 73% of retirees rely on Social Security for more than half of their income. 39% depend upon it for all of their income. That means every percentage point matters, especially when inflation for essentials continues to outplace these cost of living adjustments. This video got you thinking about your own retirement planning. I’d like to offer you something to help you see the bigger picture. We’ve created a tax smart comprehensive retirement workbook for pre-retirees and retirees.
If there’s one thing I’ve noticed in my years of working with individuals, it’s that there’s always at least one aspect in the planning process where they say, “Hm, I haven’t thought about that before.” No matter how smart they are, how much they’ve saved, something comes up, whether it be they realize they can spend more than they thought they could, they realize their tax bill is going to be higher retirement, they are going to leave money on the table with their current social security claiming strategy. This workbook is designed to help you walk through the most critical areas of retirement planning with action steps, false beliefs, and areas for you to input your own reflection items. You can download the workbook by going to the link below in the description. If you have any issues with that link, send us an email at contactbarretirement.com. The research shows the average retiree has lost roughly 36% of their buying power since the year 2000, even when COLA increases. So, what could fix it? and why it matters. Advocates are calling for two key changes.
Number one, a minimum cola of 3% each year so benefits don’t stagnate during low inflation years. Number two, switching from CPI to CPI, which reflects real retiree expenses. Until that happens, retirees will need to find their own ways to offset shortfalls through better tax planning, smarter withdrawals, and making the most out of their income streams outside of Social Security. Here’s how to protect your retirement income even when colas lag behind inflation.
Plan for Medicare premium increases early. Build them into your retirement budget. Don’t let them surprise you. Consider delaying social security if you haven’t claimed yet. Each year you delay, your base benefit grows by up to 8%. Diversify your income sources. Rental income, part-time consulting, or taxfree Roth withdrawals all provide flexibility. Use a tax efficient withdrawal strategy. Don’t let higher inflation put you into unnecessary tax brackets. The bottom line is a 2.8% cola sounds like progress, but for most retirees, it’s a break even at best. And for many, it’s a net loss once Medicare and prescription costs are factored in. This is why social security should never be your only plan. It’s a foundation, but not a full strategy.
If you want to see how your retirement income stacks up, I built a tax smart retirement workbook to walk you through some of the most important planning topics, complete with room for you to jot down your own reflections and your own plan. The link to download it is below. I’m Hunter Brockway with Boca Retirement Strategies. Enjoy your successful retirement. Thank you for watching. Bye.