After weeks of uncertainty following the federal government shutdown, Social Security recipients have received some good news about their 2026 cost-of-living adjustment (COLA). However, for millions of retirees, there is also some bad news that may overshadow the good news. Experts are calling it a painful financial catch.
The Good News: The 2026 COLA Announcement Is Back On
The Social Security Administration (SSA) has confirmed that the COLA for 2026 will be announced on October 24, 2025. The announcement had been scheduled for October 15, but was delayed due to the ongoing government shutdown that also delayed the release of September’s Consumer Price Index (CPI) data.
COLA adjustment affects around 75 million Social Security and Supplemental Security Income (SSI) beneficiaries, ensuring that the benefits they receive keep pace with inflation. According to the SSA, benefits, including January 2026 benefit payments, will be sent without delay.
Early projections by analysts at The Senior Citizens League estimate a 2.7% to 2.8% COLA, which could increase the average monthly payments by roughly $54. That’s a slight rise from 2025’s 2.5% COLA and just above the 20-year average of 2.6%.
AARP estimates that the COLA for 2026 will range between 2.6% and 2.9% depending on the final September inflation data. Although it’s a small increase, it’s still a welcome relief for retirees amid the rising cost of living in recent years.
The Bad News: A Hidden Catch That May Shrink the Raise
The bad news is that the higher COLA comes with a major caveat that could eat much of the benefit increase before it reaches the recipients’ pockets.
Some of the expenses that could eat into much of the benefits increase include Medicare Part B premiums, which are projected to rise by 11.6%, jumping to $206.50 up from $185. Since these premiums are deducted automatically from Social Security monthly checks, retirees might see little or even no net increase in their benefits.
Additionally, higher-income seniors could accrue additional costs under income-related monthly adjustment amounts, or IRMAAs.
To make matters worse, a cost-of-living adjustment isn’t always sufficient to cancel out the inflation that retirees face. This is because everyday essentials that retirees pay for, such as health care, housing, and food, have outpaced the CPI-W, which is the inflation gauge used in the calculation of COLA.
Advocates say that the formula is outdated because CPI-W tracks price changes for wage earners and clerical workers, not retirees. According to Sue Conard, a retired nurse and Social Security recipient from Wisconsin, lawmakers should change how the COLA is determined since the CPI gauge doesn’t take into consideration many typical costs for older Americans.
“The issue of how the COLA is determined is flat-out wrong because health care is not factored into the CPI,” said Conard, speaking on the front steps of the Longworth House Office Building.
Some lawmakers have heard her cry and are now pushing to replace the CPI-W with a measure that is more appropriate for seniors, like the Consumer Price Index for the Elderly (CPI-E). This gauge would be more accurate at reflecting the costs of prescriptions, groceries, and health care, which are dominant in the budgets of most retirees.
Higher Checks, But Little Relief
While the COLA for 2026 is expected to be slightly higher than that of 2025, meaning that retirees will get more increases in their benefits, rising costs of other services, such as Medicare premiums, are likely to eat up much of the increase.
Experts even warn that, despite the boost, some retirees will continue facing financial stress. According to The Senior Citizens League, Social Security benefits have lost about 36% of their purchasing power since 2000. This trend is set to continue as the cost of living continues to increase. Additionally, the outdated formula used in the calculation of COLA is not accurately factoring in the rise in costs of what retirees usually purchase.