Expert: Here’s How To Make the Most of the 2026 Social Security New COLA
Written by
Gabrielle Olya
Edited by
Brendan McGinley
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The Social Security Administration recently announced a 2.8% cost-of-living adjustment (COLA) for 2026, which translates to approximately $56 more per month for the average retiree. But findings from a new Allianz Life survey show many Americans are still unprepared to make the most of their benefits, with 55% saying they don’t know much about how Social Security fits into their retirement plan.
Here’s a look at how retirees can make the best use of the 2026 COLA and their Social Security benefits in general.
Cover Essential Costs With Social Security
“Social Security benefits are a key part of a retirement strategy since they offer guaranteed income that will increase over time through COLAs,” said Kelly LaVigne, VP at Allianz Life Insurance Company of North America. “One way to use those benefits is to have Social Security cover your essential expenses.”
When creating a retirement budget, it’s important to have a dependable source of income to cover essential costs like electric bills and car insurance. Social Security may be able to cover all or a significant portion of those costs.
“You may have a gap in funds — your essential expenses are greater than your Social Security payments — and in that case, you may consider adding another source of guaranteed income like an annuity to address that gap,” LaVigne said.
If you cover essential costs with a combination of Social Security and other guaranteed income, you can then use personal funds from an IRA or 401(k) for fun expenses.
Why the 2026 COLA Won’t Solve Everything
Ideally, the COLA will help you better cover essential costs, especially as these costs rise. However, LaVigne notes that much of the increase in benefits may have to go toward increased Medicare costs for many retirees.
“While Social Security benefits will increase next year, we don’t know yet how much more money will be in a retiree’s pockets,” he said. “That is because we don’t know about total increases to Medicare payments, which would eat into the increase from Social Security.”
It’s possible that you won’t experience a true income increase if the Social Security COLA is less than your Medicare premium increase, so it’s important to take that into account when creating your 2026 retirement budget.
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