The Social Security Administration provides essential payments for millions of retirees to help them have a decent living in their retirement. However, the latest 2026 Cost-of-living-adjustment (COLA) forecast is bad news for them. The recent updates suggest that Social Security benefits for 2026 might rise by only 2.2%, making it the smallest COLA increase in five years.
This lower COLA could mean that most retirees would have a decrease in purchasing power, especially given the continued rising costs of housing and healthcare. This is a double whammy for retirees, most of whom entirely rely on Social Security benefits to cater for their daily expenses.
How the Social Security COLA is Calculated
The Social Security Administration determines COLA adjustments using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W tracks inflation by measuring price changes for goods and services. To calculate COLA, the SSA compares CPI-W data from the third quarter, which is from July to September of the current year, with the same period in the previous year. If the prices have increased, Social Security benefits also increase accordingly.
Why Only a 2.2% COLA Increase Could Hurt Retirees
Although a 2.2% COLA increase is still good news, it falls below the historical average of 2.3% since 2010. In 2022, COLA increase was at 5.9%, 2023-8.7%, 2024-3.2%, while in 2025 it was 2.5%
Reasons Why the Forecasted 2026 COLA Increase is Bad News for Retirees.
- It Does Not Match Retirees’ Actual Expenses.
One major concern is that CPI-W is based on the spending habits of working-age Americans, not retirees. CPI-W puts greater emphasis on price changes in food commodities, groceries, transportation, and entertainment, which are expenses of younger households. Unfortunately, it is less concerned with the price changes in healthcare and housing, yet they are the two biggest expenses for seniors.
According to recent inflation data, housing costs have increased by 4.2%, which is close to double the 2026 COLA projection. Medical care services have also risen by 3%, which outpaces the expected COLA.
- Social Security Benefits’ Purchasing Power is Declining.
Analysis done by The Senior Citizens League (TSCL) in 2024 indicates that the purchasing power of Social Security benefits has declined by 20% since 2010. In other words, what you could buy in 2010 using $100, now costs $120 in 2024.
How a 2.2% COLA Would Affect Social Security Payments
Here’s how a 2.2% COLA would impact retirees’ monthly benefits:
| Current Monthly Benefit | Projected 2.2% COLA Increase | New Monthly Benefit |
| $1,500 | +$33 | $1,533 |
| $2,000 | +$44 | $2,044 |
| $2,500 | +$55 | $2,555 |
| $3,000 | +$66 | $3,066 |
Although these increases are of importance, they are still so low considering the real inflation, especially in healthcare and housing, as discussed earlier.
Will the 2026 Social Security COLA Projections Change?
The projected COLA figures could change if inflation rises later in the year or if it continues to slow. According to a Social Policy expert, there are still a few months left before the final figures are announced. Additionally, the official 2026 COLA will not be announced until October 2025, which is months away.
How Retirees Can Prepare for the Projected 2026 COLA
It is already known that COLA adjustments are going to be lower in 2026 as compared to other previous years. To ensure that the decrease in the amount of Social Security benefits does not adversely affect retirees in 2026, it is important for them to;
- Be ready and plan for increased costs of medical care and housing.
- Consider having alternative sources of income to supplement income from Social Security benefits.
- Stay informed on COLA and SSA updates and be alert of the final 2026 COLA announcement in 2026.
- Advocate for COLA reforms that will push Social Security COLAs to be based on the Consumer Price Index for the Elderly which better reflects their expenditure.