On the services side of the economy, KPMG Chief Economist Diane Swonk notes that healthcare sectors facing shortages of immigrant workers “are seeing prices rise faster… Day care and child care costs rose 1.7% for the month, the most since September 2023, and the third highest on record. Home aged care rose 7% this month, the fastest on record. The data dates back to 2006.”
You may be wondering why BLS employees were recalled to collect this data during the shutdown.
The answer is that each year the Social Security Administration (SSA) uses third quarter inflation data to calculate the cost of living adjustment (COLA) for Social Security (SS) recipients for the following year. With the September report hot off the presses, the SSA announced that payments for 75 million Americans receiving benefits will increase by 2.8% in 2026.
To put that in perspective, the COLA for 2025 was 2.5%; in the high inflation years 2021 and 2022, the COLA was 5.9% and 8.7% respectively; and in years of low inflation, such as 2015 and 2016, seniors saw little increase (0.0% and 0.3% respectively). Over the past decade, COLA increases have averaged about 3.1%.
The 2026 increase means that Social Security retirement benefits will increase by an average of about $56 per month starting in January. That may not seem like much, but an extra $672 over the course of a year helps, especially for those Americans living on a fixed income.
There was another notable data point that came from the September CPI report: an adjustment to the SS Earnings Test, which applies to recipients who file for benefits BEFORE full retirement age (67 for those born in or after 1960) and continue to work.
The rule states that if you are younger than full retirement age for the entire year, the Social Security Administration will withhold $1 from your benefit payments for every $2 you earn above the annual limit. For 2026, that limit is $23,480. In the year you reach full retirement age, €1 in benefits will be deducted for every €3 you earn above any other limit. In 2026, this limit on your earnings will be $65,160. (SSA only counts earnings up to the month before you reach your full retirement age, not your earnings for the entire year.)
The SS earnings test and the annual COLA underscore why it is usually wise for people in good health to wait to claim your Social Security benefits until at least your full retirement age (66-67, depending on your year of birth) or until age 70, when you can receive delay-filing credits that can significantly boost retirement income.
The higher the Social Security benefit, the more money you can collect annually when the COLA is announced.
Jill Schlesinger, CFP, is a business analyst at CBS News. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check out her website at www.jillonmoney.com.
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