2026 Cost-of-Living Adjustment (COLA): What Retirees Can Expect From Social Security

In 2026, Social Security benefits are expected to rise again. But while another cost-of-living adjustment (COLA) may sound like good news, the story behind the numbers is far more complex and even concerning.

‍

According to the latest estimates, the cost of living adjustment for 2026 is projected to be 2.5%, matching 2025’s increase. If this prediction holds, it would mark the fifth consecutive year of COLA increases at or above 2.5%  a milestone not seen since the late 1980s. Yet, despite these boosts, many retirees are still struggling to keep pace with real-world expenses. The reason? The system used to calculate these increases may be failing the very people it's meant to protect. You should read about 2026 cola prediction​.

‍

In this in-depth look, we’ll explore what the cost of living adjustment 2026 means, how it’s calculated, what retirees can expect in real dollars, and why inflation and the outdated way we measure it continues to erode the true value of Social Security benefits.

‍

What Is COLA and How Is It Calculated?

‍

The Cost-of-Living Adjustment (COLA) is an annual increase in Social Security payments, designed to help recipients keep up with inflation. Since 1975, the Social Security Administration (SSA) has calculated COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Here’s how it works:

• Only data from July, August, and September of each year is used.
• The average CPI-W for these months is compared to the same period from the previous year.
• If prices have risen, Social Security benefits increase by the percentage difference.

‍

However, there’s a growing concern that the CPI-W no longer reflects the spending habits of retirees. It emphasises costs more relevant to working adults like transportation and education while underweighting essential retiree expenses such as healthcare and housing. This creates a gap between the benefits received and the costs retirees actually face.

‍

Economic & Policy Context: Why Inflation Still Hurts Seniors

‍

Over the past five years, inflation has fluctuated wildly. After historic pandemic-era stimulus, the M2 money supply in the U.S. surged by over 26% in 2020, fuelling rapid price increases. The Federal Reserve responded by raising interest rates aggressively, attempting to curb inflation by cooling spending.

Despite signs that inflation has moderated in 2025, the underlying issue persists: Social Security benefits are not rising fast enough to offset the damage already done.

‍

According to The Senior Citizens League (TSCL), a 2024 study found that the purchasing power of Social Security benefits has declined by 20% since 2010. A previous 2023 analysis estimated a 36% reduction between 2000 and 2023. This decline isn’t just statistical it’s felt daily by millions of older Americans.

Some policy experts advocate for switching from CPI-W to CPI-E (Consumer Price Index for the Elderly), which better accounts for senior-specific expenses. But despite ongoing debates, no legislative changes have passed to adopt this more accurate index.

‍

‍

Cost of Living Adjustment for 2026 Forecast: A Historic Milestone Approaches

‍

As of June 2025, COLA forecasts from TSCL and independent analyst Mary Johnson place the 2026 increase at 2.5%. If this holds, it will be the fifth consecutive year with a COLA of 2.5% or higher:

• 2022: 5.9%
• 2023: 8.7% (the highest since 1981)
• 2024: 3.2%
• 2025: 2.5%
• 2026 (projected): 2.5%

This run mirrors the stretch between 1987 and 1996, when COLAs ranged from 2.6% to 5.4%. But unlike then, today’s retirees are dealing with rising healthcare costs, housing shortages, and increasing taxation on benefits all of which blunt the effect of annual increases.

‍

How Much Will Retirees Receive in 2026?

‍

A 2.5% increase translates to the following average monthly increases:

• Retired workers: +$50/month (from ~$2,000/month)
• Disabled workers: +$40/month
• Survivors of deceased workers: +$39/month

These increases may help offset grocery and utility bills but for those whose rent or prescription costs have doubled in recent years, the impact may feel negligible.

‍

Why COLA Still Falls Short Despite the Raise 

‍

While COLA was designed to preserve purchasing power, its methodology fails to fully account for senior lifestyles. The CPI-W index tracks the habits of urban wage earners and clerical workers, many of whom are in their 20s–50s and spend less on healthcare or housing.

Retirees, by contrast, allocate more of their budget to:

• Prescription drugs and medical appointments
• Rent or property taxes
• Long-term care services

When these costs rise faster than general inflation and they have retirees see their effective income shrink, even with annual COLA increases.

‍

How Are Retirees Planning Around This?

‍

Financial planners report a rise in clients seeking annuity recalculations and TSP withdrawal strategies to cope with stagnant benefits. Some steps retirees are taking include:

• Diversifying income streams: More retirees are drawing from IRAs or part-time work to supplement benefits.
• Tightening budgets: Adjusting for essentials only, limiting travel and luxury expenses.
• Tax planning: Since COLA increases can bump recipients into higher taxable thresholds, many are adjusting their withholding rates or estimating taxes quarterly.

Financial advisors also encourage:

• Delaying Social Security until age 70 if possible (to maximise benefit amount)
• Reviewing Medicare Advantage plans annually for better cost coverage

‍Could 2026 Mark a Turning Point?

‍

The continued erosion of Social Security’s purchasing power is pushing lawmakers to reconsider COLA methodology. While talk of switching to CPI-E has gained traction, political hurdles remain.

If nothing changes, 2026 may go down in history for two reasons:

1. The fifth year of above-average COLA increases
2. A continued decline in the real value of those benefits

The combination could catalyse bipartisan action especially as younger generations begin to confront their own uncertain retirement futures.

‍

Conclusion: Don’t Let COLA Be Your Only Strategy

‍

The 2026 COLA may be in line with expectations, but it’s not enough to rely solely on Social Security increases. Retirees should take proactive steps to preserve their income, understand how COLA affects taxes and Medicare, and push for long-term policy improvements.

As we await the official announcement in October 2025, one thing is clear: staying informed and financially agile is more important than ever.

Stay Updated Bookmark this article and check back after Q3 inflation data is released for final COLA confirmation.

‍

FAQs

‍

Will Social Security recipients get a COLA in 2026?

‍

Yes, based on current forecasts, recipients are expected to see a 2.5% increase in 2026 benefits.

‍

How is COLA calculated for Social Security?

‍

COLA is based on the CPI-W index, comparing the third quarter (July–September) of the current year with the same period from the previous year.

‍

Why is CPI-W not suitable for seniors?

‍

Because it tracks younger, working individuals’ spending habits, it underrepresents costs that matter most to retirees—like medical care and housing.

‍

Could future COLAs be calculated differently?

‍

Yes. There’s growing support to switch to CPI-E, which better reflects elderly consumers' costs, but this would require legislative action.

‍

What should retirees do now?

‍

Prepare by reviewing your retirement budget, exploring additional income sources, and consulting a financial planner for tax and investment strategies.

‍