A new bill has been introduced in Congress and it could change how Social Security works. The proposed bill aims at increasing cost-of-living adjustments (COLA) and reduce taxes, starting in 2026 but not all seniors will benefit equally.
What is the COLA Reform Act of 2025?
Right now, the government uses the Consumer Price Index for Urban Wage Earners (CPI-W). This index reflects the spending habits of working adults. The COLA Reform Act of 2025 would change how annual Social Security increases are calculated by switching to the Consumer Price Index for the Elderly (CPI-E). This switch ensures that when calculating COLA, the spending habits of retirees are taken into consideration instead of focusing on the general factors that apply to all citizens. Retirees’ lifestyles revolve around housing, healthcare, and prescription drugs, and the CPI-E could focus more on these. Supporters say this would lead to larger COLA increases. For example, if CPI-W would give retirees a 2.5% increase, CPI-E might result in a 3% raise instead.
How Would This Change Benefit Retirees?
Switching to the CPI-E would mean Social Security checks grow faster each year. That’s because CPI-E focuses on the actual costs older Americans face, like housing, medical care, and prescription drugs. These are areas where prices tend to rise faster than average.
For retirees living on a fixed income, even a small increase can make a big difference. Over time, those yearly cost-of-living adjustments (COLAs) could really add up, giving seniors more breathing room in their budgets. Some of the key benefits include larger annual increases in monthly payments, better protection against inflation, and more stability and financial confidence in retirement.
If the bill becomes law, the new formula would apply starting with the 2026 COLA. That means millions of retirees could start seeing higher checks in just a couple of years.
Will Social Security Taxes Go Down Too?
Yes. Another part of the proposal would reduce taxes on Social Security benefits. Right now, many retirees pay federal taxes if they make over $25,000 (individuals) or $32,000 (couples). These limits haven’t changed in decades. The bill would raise those thresholds to $35,000 for individuals and $50,000 for married couples. It would also adjust them for inflation in the future. This means fewer retirees would be taxed. And those who still pay would likely owe less.
What is the You Earned It, You Keep It Act?
This second bill was introduced by Rep. Josh Riley of New York. It goes even further than the COLA Reform Act. If passed, it would eliminate federal taxes on Social Security benefits altogether starting in 2026. The bill would fund this tax break by changing payroll taxes. Right now, income above $168,600 isn’t taxed for Social Security. Riley’s plan would require high earners to keep paying into the system above that cap. The goal is to provide tax relief for everyday retirees while making sure the program stays funded long-term.
What Are the Chances it Passes?
Both bills have support from lawmakers in both parties. But they still face a tough road. Some critics say higher benefits without new revenue could worsen the trust fund’s shortfall. According to the latest data, the Social Security Trust Fund may run out of money by 2033. That means Congress will need to find ways to balance spending and funding. Hearings on the bills are expected in May. Whether they pass will depend on how lawmakers agree to address the program’s future.
Why this is Important
For many Americans, Social Security is the main source of income in retirement. And with prices for food, rent, and healthcare continuing to rise, even a small boost in monthly checks can make a big difference. The proposed changes could offer more support for seniors who need it most. But not all retirees will benefit equally. Some may see major savings, while others may see very little change. Still, the government is about to change how Social Security works. Higher COLA and lower taxes could be on the way but not for everyone.