2025 is coming to an end and that means several things, but, to be honest, the one that interests us the most is knowing how much the Cost of Living Adjustment (COLA) will increase for 2026, and here’s the spoiler: it will be 2.8% (a bit above the forecasts that estimated it would be well below 2.5%). More than 70 million retirees will benefit from this small percentage.

And it will arrive, as always, with the new year. The first payment corresponding to 2026 will already include that 2.8% so that our retirees suffer less from the impact of inflation on their purchasing power.

The Social Security Administration (SSA) confirmed that the increase will benefit both those who receive Social Security and Supplemental Security Income (SSI), and the average payment will become 2,060 per month, about 56 dollars more than this year. But not all states will experience the same impact; it is estimated that New Jersey, Connecticut, and Delaware will be the ones to notice the strongest changes.

How is the COLA calculated?

Well, it’s very simple and no, it’s not chosen at random. It is calculated based on the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) that measures how much the prices paid by the working class have increased.

The SSA takes the average of that index during July, August, and September, and compares it with the same months of the previous year. If the cost of living has gone up, this adjustment also goes up.

In 2025, the average index was 317.265, compared to 308.729 from the previous year. That gives an increase of 2.76%, which the SSA rounded to 2.8%. A little more than last year’s increase (2.5%), although still below the average of other years (3.6%).

Does it help at all?

Yes, they give you 56 dollars more this year, it’s not much and for most retirees it’s not enough for anything.

According to an AARP survey, 77% of people over 50 believe that an increase of less than 3% does not make up for the rise in the price of food, energy, or medicine, and it seems that whoever sets the COLA knows very little about supermarket or housing prices…

Medicare goes up…

They also report that Medicare Part B premiums will also increase, from 185 to about 206.50 dollars a month, so much of this COLA will almost immediately go toward paying health insurance, leaving only 35 net dollars for many beneficiaries… And to be honest, what can you buy nowadays with 35 dollars for a month???

The 10 states where the increase will be highest

The percentage of the increase is the same for everyone, but the money isn’t. States where retirees earn more will also see higher increases in absolute terms.

New Jersey: from $2,099 to $2,158
Connecticut: from $2,083 to $2,142
Delaware: from $2,064 to $2,122
New Hampshire: from $2,039 to $2,096
Maryland: from $2,007 to $2,064
Michigan: from $2,004 to $2,061
Washington: from $1,991 to $2,047
Minnesota: from $1,981 to $2,037
Indiana: from $1,952 to $2,007
Massachusetts: from $1,946 to $2,000

Why these differences?

Because the pension amount is based on each person’s 35 years with the highest earnings. In states with higher wages, the benefits are also higher.

Curiously, California and New York do not appear in the top 10 despite their salaries, and that is basically to avoid creating a pull effect since experts say that the high cost of living in those areas makes many retirees end up moving to more affordable places before collecting their benefits.

Historical overview of the COLA

The COLA has existed since 1975, and since then it has served to measure how the country is doing economically. The historical average is around 3.6%, although in the last decade it has moved more between 2% and 3%.

There were three years (2010, 2011, and 2016) in which there was no increase because inflation was zero or negative, but there were also other years (1980) when the COLA was 14.3.

The challenge

Many people keep wondering if Social Security has a future as it is currently structured. As you already know, the funds could run out before 2033, which could mean that benefits would be reduced by more than 20% if decisions are not made soon.

It is the challenge of this government and all others to keep the SSA alive so that the millions of people who depend on it can survive in this roller coaster that is our economy.