Social Security benefits are rising again, but probably not enough to offset healthcare costs

The nearly 76 million Americans who receive Social Security benefits are slated to find out on Oct. 14, 2026, how much their monthly check will rise. This cost-of-living adjustment, or COLA, is how the government tries to make sure that the value of Social Security benefits keeps up with inflation. Without it, the same payment would cover less of what recipients are spending on medical care, housing, groceries, clothing and other necessities.

I am a finance professor, and one of the topics I research is how inflation affects retirees’ investment choices. And I believe the upcoming bump doesn’t capture the inflation challenges that many people who receive Social Security benefits face.

The percentage increase in Social Security benefits depends in part on the annual inflation rate as of September 2026, which the Bureau of Labor Statistics, a government agency, will also release on Oct. 14. It stood at 3.4% in August, according to the BLS. Experts have no doubt that the cost-of-living adjustment for 2027 will be far above the 2.8% for 2026 and 2.5% for 2025. Many forecasts range from 3.4% to 3.6%.

But the size of the increase is only part of the issue. The index used to set the COLA reflects what working people buy, not retirees, and that is a mismatch at the heart of a long-running debate over how the adjustment should be measured.

The government has annually increased Social Security benefits to keep up with inflation since 1975. Congress previously had to pass a law each time it increased benefits. As a result, years could pass without an adjustment, despite climbing prices.

The metric that the government uses is its consumer price index for urban wage earners and clerical workers, known as the CPI-W. The Bureau of Labor Statistics tracks changes in the prices of goods and services that working households typically buy to calculate this index.

The Social Security Administration then compares the average CPI-W reading for July, August and September with the average for those same months in the prior year to set the COLA adjustment, which kicks in the following January.

If the economy contracts and prices fall, however, benefits stay the same. That happened in 2009, 2010 and 2015.

One big problem with this calculation is that it understates healthcare inflation.

Out-of-pocket health costs, including Medicare premiums, deductibles and copayments for medical care and prescription drugs, typically consume nearly 30% of Social Security benefits, according to research from the nonpartisan Center for Retirement Research at Boston College.

For example, the government deducts Medicare Part B premiums directly from many retirees’ Social Security checks. The standard monthly Part B premium rose by US$17.90 in 2026, from $185 to $202.90. That increase alone consumed roughly one-third of the average $56 monthly gain in benefits from the 2026 COLA.

More broadly, this big jump in healthcare costs for people covered by Medicare, as most Americans getting Social Security benefits are, helps explain why there is a long-running debate over how the program measures inflation.