fyi50+: There have been a bunch of stories about Social Security these days and I wanted to check in with Dave Freitag our Social Security expert about the ones that are new and what everyone should know.
Freitag: The biggest news is the announcement of the Social Security Cost of Living Adjustment (COLA) increase that will go into effect on January 1, 2026. The COLA increase will be 2.8% which is a small lift from the 2.5% in place for 2025.
Effective date
fyi50+: When does the Social Security COLA increase take effect?
Freitag: The Social Security COLA for 2026 takes effect on January 1, 2026. The COLA increase is measured by the Department of Labor during the months of July, August and September. Those price increases are normally calculated and published in mid-October. This year, because of the Government closure, the release of the 2026 number was delayed until the end of October.
Eligibility
fyi50+: Who gets the social security COLA increase?
Freitag: The COLA increase is automatically applied to the payments of those who are collecting benefits. It is also applied to those who are 62 or older and are not collecting benefits but will collect one day in the future.
History of Social Security COLA adjustments
fyi50+: When did the Social Security Administration start increasing benefits with these COLA adjustments?
Freitag: The first automatic increase started in 1975. Congress mandated that the COLA increase would be tied to the CPI-W index published by the Department of Labor.
Why COLA matters
fyi50+: Why does Social Security COLA matter for retirement?
Freitag: The fact that benefits have automatic COLA adjustments make Social Security payments a very valuable part of a retirement income plan. It is important to look back over the past few years to recognize how valuable these increases are to people receiving benefits.
Social Security COLA increases by year (2022-2026)
• 2022: 5.9% increase
• 2023: 8.7% increase
• 2024: 3.2% increase
• 2025: 2.5% increase
• 2026: 2.8% increase
When you look at these increases cumulatively, the benefits in 2026 will be 23.1% higher than they were in 2021. Very few benefit programs exist in this country that can point to a 23% + benefit increase over a five-year period with no increase in cost to the recipients.
fyi50+: Dave, many would say that these increases are really just not enough to offset the cost-of-living increases that most workers face.
Freitag: That is a valid point. But imagine if the automatic COLA adjustments were not part of the Social Security system at all. That was the case before 1975. At that time, any COLA adjustments required a separate act of Congress.
For most people who have access to private pension plans, they would be grateful if their plans contained a 23% lift over a five-year period even if it did not automatically match the COLA for that year. To include automatic COLA increases in projected cash flows is a very expensive proposition and adds a great deal of value to the program.
Other Social Security changes for 2026
fyi50+: I must admit the COLA increase is big news! What other announcements are important about the Social Security program we should know about?
Freitag: The Social Security Administration announced that at the end of September they no longer mail individual checks to people receiving benefits. With only a few exceptions, the money is now transferred electronically directly to a bank account. This is a big cost saving measure plus an increase in security that the payments will be credited to the correct people.
Proposed Social Security terminology changes
Freitag: Finally, there is a bill moving through Congress with major bi-partisan support, that would change some definitional terms that are in common use today.
New Social Security age terminology
- “Early eligibility age” will become “Minimum monthly benefit age” (62)
- “Full Retirement Age” will become “Standard Monthly benefit age”
- “Delayed Retirement Age” will become “Maximum Monthly Benefit age”
fyi50+: These look like terms that will help people better understand some of their choices.
Freitag: Correct. We will be tracking the progress of these changes and see if they make it into the law.
