Before the COLA Number Drops
Every October, my neighbor two doors down walks to his mailbox like he's checking lottery numbers. He's not waiting on a scratch-off. He's waiting on the Social Security Administration's announcement of next year's cost-of-living adjustment, or COLA — the annual reset that decides whether his fixed income keeps pace with his grocery bill.
He's not alone. By the time this column runs, the 2027 COLA may already be public, or it may still be a few weeks off — the Administration typically announces it in mid-to-late October, based on the third-quarter Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. Whatever the number turns out to be, it's worth understanding what it is and isn't before you build next year's budget around it.
WHAT COLA ACTUALLY DOES
A COLA is not a raise. It's a preservation mechanism. Social Security compares average CPI-W readings from July, August, and September of the current year to the same three months a year earlier. The percentage difference, rounded to the nearest tenth, becomes next January's adjustment. For 2026, that math produced a 2.8% increase — about $56 a month for the average retired worker, according to the Social Security Administration. For 2025, it was 2.5%. Over the last decade, the average has run closer to 3.1%.
The mechanism is doing exactly what it was designed to do: keep a fixed benefit from quietly losing ground to inflation. It was never designed to help you get ahead. That distinction matters for how you plan around it.
WHERE THE COLA MATH GETS PERSONAL
Say a retired couple relies on Social Security for $42,000 of their annual income and draws the rest — call it a hypothetical $1,000,000 portfolio — at a 4% withdrawal rate, or $40,000 a year. A COLA of roughly 2.8% adds about $1,176 to their Social Security income. That's real money. It's also usually smaller than the actual increase in their Medicare premiums, property insurance, or grocery bill in a given year, which is why so many retirees feel like the COLA "doesn't cover anything" even when the math technically worked.
This is where the two halves of a retirement income plan — Social Security and portfolio withdrawals — need to talk to each other. If your portfolio withdrawal rate is fixed at a flat dollar amount instead of adjusting with inflation, the COLA on the Social Security side is doing all the work of keeping your total income current, and it may not be doing enough. If your withdrawals do adjust for inflation each year, the COLA becomes a helpful add-on rather than your entire safety net.
THE MEDICARE WRINKLE
Most years, some or all of a retiree's COLA gets absorbed before it ever reaches the checking account, because the standard Medicare Part B premium is typically deducted directly from the Social Security check — and Part B premiums tend to rise too. A "hold harmless" provision generally prevents your net check from shrinking outright, but it doesn't prevent the increase from feeling smaller than the headline number. Anyone who has ever done long division in their head while standing at the mailbox knows this feeling well.
A CALMER WAY TO USE THE NUMBER
Wait for the actual figure. Budgeting off a projection from a financial blog in August is guesswork. The SSA's own announcement is the only number worth acting on.
Check it against your own COLA notice. Your personalized letter, mailed in early December, shows your specific new benefit and any Medicare deduction — not just the national average.
Revisit your withdrawal rate once a year. A COLA is a good annual trigger to ask whether your portfolio income needs the same kind of inflation adjustment your Social Security check just got.
None of this requires urgency or a big reaction. It requires a five-minute conversation, once a year, between your Social Security notice and your investment statement — ideally with someone who can see both.
My neighbor, for what it's worth, has started a small betting pool with his golf group each October on the exact percentage. Nobody has won two years running. If nothing else, the COLA has become one of the more sociable numbers in American retirement planning — which is more than you can say for most IRS notices.
THE MATH –A $1,000,000 EXAMPLE
A hypothetical retired couple draws $40,000 a year from a $1,000,000 portfolio (a 4% withdrawal rate) alongside $42,000 in combined Social Security benefits, for $82,000 in total hypothetical income.
A 2.8% COLA — the actual figure applied for 2026, used here only as an illustrative rate — would add about $1,176 to the Social Security portion alone.
This is a simplified, hypothetical illustration for educational purposes only. It assumes no taxes, no Medicare premium deduction, and a static withdrawal rate. It is not a projection of any individual's actual benefit or portfolio outcome.
SOURCES
Social Security Administration, "Social Security Announces 2.8 Percent Benefit Increase for 2026," news release, Oct. 24, 2025 (blog.ssa.gov) — as of Sept. 2026.
Social Security Administration, Cost-of-Living Adjustment methodology (CPI-W), ssa.gov/cola — as of Sept. 2026.
Evan R. Guido, Senior Wealth Advisor, is the Founder of Aksala Wealth Advisors LLC, a 2026 Forbes Best in State Wealth Advisor, a 2018 Forbes Top Next-Gen Advisors award recipient. Evan heads a team of financial strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 Aksala.com eguido@aksalawealth.com 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. Securities offered through Cetera Wealth Services, LLC member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. The views and opinions presented in this article are those of Evan R. Guido and not of Cetera or its subsidiaries. These opinions are based on Evan’s observations and research and are not intended to predict or depict performance of any investment. These views are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities and purely for education and entertainment. Past performance does not guarantee future results.The Top Next Gen list includes 250 rising advisors who help manage over $490 billion in client assets. Each advisor was nominated by their firm, then vetted and ranked by SHOOK Research. The rankings, developed by SHOOK Research, are based on an algorithm of qualitative criterion, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors who are considered have a minimum of four years' experience and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass the highest standards of best practices. The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, is based on an algorithm of qualitative data, rating thousands of wealth advisors with a minimum of seven years' experience and weighing factors like revenue trends, assets under management, compliance records, industry experience, and best practices learned through telephone and in-person interviews. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Listings in these publications and/or awards are not guarantees of future investment success. These recognitions should not be construed as endorsements of the advisor by any clients. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using these third-party ratings or award.