The effects of inflation plays no favorites when it comes to the finances of a household. However, in the case of those living on fixed incomes such as Social Security, any negative fluctuations to the cost of goods and services could have detrimental consequences.
Many beneficiaries of the Social Security program are reliant on their monthly benefit checks to cover their expenses – – at least in part. Some beneficiaries, however, are entirely dependent on their monthly benefit.
Consequently, in order to ensure that the monthly benefit is able to sufficiently cover the needs of the beneficiary, the Social Security Administration (SSA) implements a Cost of Living Adjustment to all benefit amounts once each year. The adjustment figure, often referred to as the COLA, varies from year to year as it is calculated using year over year inflation data.
The COLA for 2026 will be officially be announced later this year in October with projections currently standing between 2.5-2.7%. However, the unfortunate truth is that a high COLA is not necessarily as great as it may seem in the grand scheme of things. Here is what you need to know.
Social Security benefits get an annual boost
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as released by the Bureau of Labor Statistics is the measure of inflation used to determine the COLA each year. The third quarter CPI-W data of the current year is measured against the third quarter CPI-W data of the previous year.
If there is an increase from the previous year to the current year, the percentage increase becomes the COLA for the upcoming year. The COLA for 2025 was 2.5%.
Conversely, if there is a decrease from the previous year to the current year, the COLA comes in at 0% meaning that benefit amounts remain stagnant for the year. Over the past several decades, there had only been three years where the COLA was announced at 0.0%. This occurred in 2010, 2011 and 2016.
Using monthly CPI-W data for the year thus far, The Senior Citizens League has projected a COLA of 2.5% based on May data, but later updated their projections to 2.6% in July. Mary Johnson, independent Social Security and Medicare policy analyst, has put the 2026 COLA projection at 2.7%.
These figures could, of course, still change since the third quarter of the year has not yet passed. The official COLA figure could even be vastly different if President Donald Trump’s tariffs cause inflation to soar now that they are in effect.
The COLA for 2026 will officially be announced by the SSA on October 15th.
Does the COLA really retain the buying power of the monthly benefit?
Whilst a higher COLA means a bigger bump to you benefit, it also means that costs have risen. Many seniors have begun to feel frustrated with regards to their monthly benefits and “94 percent said they felt the 2025 COLA of 2.5 percent was too low and that their benefits grow more slowly than inflation,” according to a recent study conducted by TSCL.
The issue causing seniors to feel this way are two-fold. Firstly, the CPI-W is not the most accurate measure of inflation relative to the costs held by seniors. Secondly, the projected increase of Medicare part B premiums (which are automatically deducted from the benefit) will likely cause the COLA to seem non-existent.
“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,” according to TSCL’s study.
Furthermore, the Medicare Trustees report has estimated a 11.5% increase for 2026 which would bring the premium cost up to around $206 monthly. Assuming a 2026 COLA that matches the current projections, the small bump will likely be lost to the beneficiary before their check even reaches them.