The Social Security Administration announced the cost-of-living increase Friday.
The COLA affects benefits for more than 70 million U.S. residents, including Social Security recipients, disabled veterans and federal retirees. That's about one in five Americans.
By law, the COLA is based on a broad measure of consumer prices generated by the Bureau of Labor Statistics. Advocates for seniors claim the inflation index doesn't accurately capture rising prices faced by seniors, especially for health care.
Meanwhile, Americans increased their spending at retailers last month by the most in two and a half years, driven by strong auto sales as residents of hurricane-ravaged areas replaced destroyed cars.
The Commerce Department says retail sales rose 1.6 percent in September, after slipping 0.1 percent in August. Auto sales jumped 3.6 percent, the most since March 2015. Gas sales climbed 5.8 percent, the most in four and a half years, likely reflecting price spikes after Hurricanes Harvey and Irma.
Even excluding the volatile auto and gas categories, sales rose a solid 0.5 percent, up from a 0.1 percent gain in August.
Consumers are optimistic about the economy, unemployment has hit a 16-year low, and wages have ticked up in recent months. That should boost spending in the coming months.