3 Ways to Stretch the 2026 Social Security COLA For Your Budget

Senior couple sitting at the kitchen table with croissant and cups of tea, looking at digital tablet and recalculating their expenses. — (Image credit: Getty Images)

Counting on your annual inflation "raise" in Social Security benefits to help cover your rising expenses in 2026? You may find yourself frustrated as the new year unfolds.

Social Security's annual cost-of-living adjustment (COLA) will be 2.8% in 2026, just a smidge higher than 2025's 2.5% increase, which was the lowest boost in benefits since 2021. The average monthly payment will rise by about $56, to an estimated $2,071, while the maximum that a recipient can take home at full retirement age is expected to hit $4,152 a month, up from $4,018 in 2025.

The modest COLA is a positive sign that inflation, despite creeping up lately due partly to tariffs, still remains far below recent pandemic-era highs. That good news may feel underwhelming, however, when you're at the checkout counter or paying your bills. Consumer prices have risen nearly 25% overall since 2020, and household staples such as eggs and beef have more than doubled in that period.

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Adding to the sting for 2026: The 9.7% increase in Medicare premiums, which will raise monthly payments for coverage by $17.90 for the typical beneficiary, wiping out nearly one-third of the increase in Social Security benefits. And if you're among the 5 million high-income Medicare recipients who pay a premium surcharge known as the income-related monthly adjustment amount (IRMAA), your Social Security payments could actually go down next year after factoring in the Medicare price hike.

Retirees are feeling the pain. More than three-fourths of the respondents in a recent AARP poll said that a 3% COLA would not be enough to keep up with rising prices, while 72% said they'd need an adjustment of 5% or more to afford their living expenses.

"The loss of buying power for older Americans has really accumulated over the years," says Shannon Benton, executive director of The Senior Citizens League. Part of the problem, Benton notes, is that the Social Security Administration calculates the COLA using an inflation measure that reflects the expenses of urban wage earners rather than those of retirees.

For example, she says, health care doesn't get enough weight, while technology costs, which may have less relevance for retirees, have an outsize impact. "Every year that the COLA doesn't keep up with the actual inflation rate that older people experience, it increases the loss of buying power more and more," Benton says.

If the 2026 COLA won't keep up with your household's rising costs, these steps may help.

Get creative about trimming costs

You may be able to lower your bills by asking and shopping around for better rates on everything from your gym membership to your insurance policies. More than 90% of Americans who switch auto insurance carriers save money, the majority by $100 or more a year, according to a recent LendingTree survey. The online loan marketplace has also found that 95% of credit card holders who ask to have an annual fee waived or reduced are successful.

Another prime place to look for savings: "Subscriptions and service fees only go up," says Pam Krueger, founder and CEO of Wealthramp, a referral service for fiduciary financial advisers. "Think monthly streaming, extra cell lines and lots of apps you probably don't use. Review them, then cancel the subscriptions you really don't need."

If you have credit card debt — as do 42% of Americans ages 65 to 74 and 35% of those 75 and up — consider moving it to a balance-transfer card with a 0% introductory rate to give you a break on interest charges while you pay it down (the introductory rate lasts for 15 months, on average). "Credit card debt is something you should address head on," says Pedro Silva, principal partner at Apex Investment Group.

Generate extra income

An older man appears happy as he looks over financial paperwork at his kitchen table.

After diligently building your retirement savings for decades, it can be psychologically difficult to switch to spending mode, but a modest bump in withdrawals could provide you with just enough extra cash to cover higher expenses.

More than one-fourth of retirees take less than 3% from portfolios every year, according to IRALogix, even though studies suggest a 4% to 4.7% withdrawal rate, adjusted annually for inflation, will not put most retirees at risk of outliving their assets.

Another option is to take on a part-time job or side hustle, something that one in five baby boomers now do, earning them an average of more than $900 per month, according to Bankrate. Sites such as SideHusl.com and RetirementJobs.com can help you find an opportunity that makes sense for your situation.

Factor inflation into your investment plan

With tariffs projected to keep upward pressure on prices for the foreseeable future, retirees probably can't expect the challenge of what feels like an inadequate annual Social Security COLA to be resolved anytime soon, experts say. That makes it all the more important to include a longer-term inflation hedge in your financial strategy.

Your best bet, says Mike Lynch, managing director of applied insights at Hartford Funds, is to maintain a healthy dose of equities in your investment mix, along with fixed-income investments such as bonds and certificates of deposit. Stocks, historically, have delivered the best inflation-beating returns over long periods, he says, compared with other assets.

Other investment options that can help you hedge against cost increases include inflation-protected annuities, which provide an income stream that's guaranteed to keep pace with rising prices, as well as Treasury inflation-protected securities, or TIPS, which adjust their rates twice a year to reflect changes in the consumer price index.

Having a mix of assets is key. "We need to make sure we stay well diversified," Lynch says. "It's proven that, over time, a diversified portfolio will really help keep up with and, hopefully, outpace inflation."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Beth Braverman is an award-winning journalist and content producer who has spent more than a decade writing about travel, personal finance, and workplace trends. Her work has appeared in dozens of outlets, including CNBC.com, Barrons.com, and Medscape. Known for translating complex financial and business topics into engaging, actionable stories, she also creates content for leading financial institutions and nonprofits. A graduate of Syracuse University's S.I. Newhouse School of Public Communications, Beth is passionate about helping readers make smarter decisions about their money and their careers. She lives in Westchester County, N.Y., with her husband and two children.