Social Security’s 2026 COLA estimate is climbing, but there’s a catch

On: Tuesday, April 8, 2025 9:47 AM

“Since 2002, Gallup has been asking retired persons each year how much Social Security helps them; every year 80%, 90% reply that Social Security is their ‘mainly’ or ‘partially’ source of income.” So this implies that, generally, through Social Security, the elderly add support to their lives. What is COLA and why is it important?

COLA stands for Cost-of-Living Adjustment, wherein the Social Security Administration (SSA) tries to chase inflation rate adjustments in people’s pensions. Surprisingly, it is meant to ensure that even if everything else becomes more costly, spending power remains unaffected in the retired class.

For example, if the rise in inflation is 2.5%, then SSA tries to raise Social Security by 2.5%. Before 1975, COLA was decided without any strict rule and became dependent on the increasing rate of inflation from time to time. But for now, since 1975 the formula is based on inflation measurements: “CPI-W”. The choice of COLA is based on the index data from the months of July to September.

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Graphing the changes in COLA over the years

In the last 16 years, the COLA chart is quite unpredictable. In 2010, 2011, and 2016, the very low inflation did not even necessitate a COLA adjustment for that particular year, while in 2017, an increase of 0.3% was given. With the COVID-19 jump in inflation due to government help, the increase in COLA was large this time.

COLA for 2022: 5.9%
COLA for 2023: 8.7% (biggest increase in 41 years)
COLA for 2024: 3.2%
COLA for 2025: 2.5% (most recent figure)

What’s been predicted for 2026?

Currently, The Senior Citizens League (TSCL) estimated that the 2026 COLA could be 2.3% based on the inflation data in January 2025. The previous estimate was 2.1%, but has since been updated.

If the average beneficiary received an SSI check in January 2025 worth $1,978.77, according to this new forecast, that payment may be increased by around $45.51 each month in 2026. The monthly figure will go beyond $2000, on average, for Social Security benefits.

But there could be a problem with that expectation

As encouraging as it is to consider an increase in Social Security’s COLA in 2026, there’s an issue, to boot. According to the January 2025 CPI-U report, inflation was at 3 higher than the 2.3% COLA forecast.

A higher proportion of an old man’s income must be spent on paying their rent and health services; that of a younger one will increase towards trendy fashions and education. On the basis of CPI-U:

Housing Inflation: 4.4%
Health Care Inflation: 2.7%

Purchasing power for Social Security erodes when COLAs are below these rates.

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Declining senior purchasing power

The fact of the matter is that over the last 10 years, Social Security payments have effectively lost purchasing power. So, states one report issued by TSCL in July 2024, the purchasing power of seniors has been eroded 20% since the year 2010.

In 2026, when COLA is set at 2.3%, housing, and health care could march ahead, leaving the retired living in financial hardship.

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Conclusion

The Social Security COLA will rise as anticipated in 2026-but there is a secret penalty that trails afterward, far more silent even than death! The gap between inflation rates and the gross needs of seniors keeps growing. Under these circumstances, an increase in COLA alone will not be enough to help them keep abreast of real-life inflation. Therefore, retired individuals should certainly keep in mind all these things when planning.

FAQs

Q1. How much can the Social Security COLA increase in 2026?

A. According to The Senior Citizens League, COLA could increase by an estimated 2.3% in 2026, which could add about $45.51 to the average monthly amount of retired workers.

Q2. What is COLA and why is it important?

A. COLA i.e. Cost-of-Living Adjustment, is a mechanism by which Social Security checks are increased according to inflation so that retired people can maintain their purchasing power.

Q3. How is COLA calculated?

A. COLA is calculated based on CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) data between July and September. If the CPI-W average is higher than the previous year, then COLA is increased.