Each year, Social Security benefit amounts are adjusted to account for the effects of inflation thereby allowing the fixed income of millions of vulnerable Americans to retain its buying power. The amount by which the benefit is adjusted is determined using year over year inflation data from the Bureau of Labor Statistics and it is announced annually in October by the Social Security Administration (SSA).
This adjustment to the benefit amount is called the Cost Of Living Adjustment, or the COLA. Whilst adjusting benefit amounts to account for the effects of inflation is a crucial step when calculating benefit amounts, many seniors feel that the data used to determine does not sufficiently account for the expenses and lifestyles of a retired senior citizen.
A recent study conducted by The Senior Citizens League, a nonpartisan advocacy group, has revealed that almost all seniors are feeling frustrated with their benefit amounts and that the annual COLA increase is too low. Here is what you need to know.
Seniors want more out of Social Security
The annual Cola is determined using third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) of the current year measured against the third quarter CPI-W data of the previous year. If an increased is recorded from the previous year to the current year, the percentage increase becomes the COLA for the upcoming year and benefit amounts are increased accordingly as of January.
The issue with using the CPI-W as a measure of inflation to be applied to retirees is a lack of accuracy. According to a new study conducted by The Senior Citizens League (TSCL), “21.8 million seniors get by on Social Security alone.” When taking this into account, it becomes clear that there is very little margin for error or inaccuracies when it comes to accounting for inflation within a fixed income.
However, since the CPI-W is used to determine the COLA, many seniors are feeling frustration due to its inaccuracy. This is because CPI-W data is compiled based on the lifestyles of a individuals currently in the workforce who are living vastly different lifestyles with differing expenses than that of the average retiree. According to the TSCL, “most seniors think 2024’s inflation was much higher than the government’s estimate.” Furthermore, “when TSCL asked seniors how much they thought inflation was in 2024 based on their economic experiences, 80 percent thought inflation was 3 percent or higher.”
According to TSCL Executive Director Shannon Benton, “the data in this study shows what seniors have been telling TSCL for years: Social Security checks aren’t keeping up with inflation. If four in five seniors think inflation was higher than the government reported in 2024, maybe we should stop questioning their experiences and start questioning why the COLA is failing to measure them.”
2026 COLA predictions
TSCL has projected that the COLA for the upcoming year will be around 2.6% based on June data, however, this will most likely change in relation to inflation trends as the third quarter of the year progresses. The study conducted by TSCL has also confirmed that almost all seniors want reforms with regard to the way the COLA is calculated.
“The most popular option, supported by 68 percent of seniors, was calculating the COLA with an inflation index that better represents seniors’ economic experiences. The government currently calculates the COLA with the Consumer Price Index for Urban Wage Earners, but TSCL advocates switching to the Consumer Price Index for the Elderly,” as per the study. The Consumer Price Index for the Elderly focuses heavily on costs related to health care, housing, or prescription drugs — which are the main expenses generally held by seniors.
“Seniors also want to fund stronger COLAs and benefits for future generations by cutting loopholes in the Social Security payroll tax. The data show their favorite method for doing so is eliminating the limit on earnings subject to Social Security payroll taxes, which is currently just a loophole that lets wealthy Americans pay less than their fair share into the program,” Benton wrote.
“Cutting Social Security benefits simply isn’t an option. With nearly three-quarters of seniors depending on Social Security for at least half their income, any cuts to the program or reductions in benefits would push millions of hard-working Americans further into poverty, robbing them of their right to retire with dignity.”