Social Security Benefits Remain Critical for Retirees in 2026

For many retirees, Social Security serves as a vital source of income. The average retired-worker benefit check was $1,980.86 in February, a modest amount that helps beneficiaries cover their essential expenses.

Gallup has been conducting annual surveys since 2002 to understand retirees’ reliance on Social Security. Over the past two decades, between 80% and 90% of respondents have indicated their Social Security check is a “major” or “minor” income source, underscoring its importance in their financial lives.

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Given that over 52 million retired workers depend on their benefits for covering expenses, it’s no surprise that the annual cost-of-living adjustment (COLA) announcement in October is highly anticipated. Although this reveal is still six months away, the latest COLA forecast for 2026 provides both promising prospects and potential concerns for retirees.

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Understanding the Importance of Social Security’s COLA

The cost-of-living adjustment, commonly referred to as “COLA,” is a mechanism the Social Security Administration employs to combat inflation and preserve purchasing power for beneficiaries.

For instance, if the prices of everyday goods and services increase by 2% from one year to the next, Social Security benefits need to rise accordingly. Without this adjustment, seniors would be unable to afford the same basket of goods and services. Thus, COLAs act as necessary raises for retirees.

Between the first Social Security check issued in January 1940 and 1974, specific sessions of Congress determined COLAs, resulting in only 11 adjustments over 35 years, with none during the 1940s. Starting in 1975, the program used the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to provide annual COLAs, enabling a consistent method to track inflation.

The CPI-W comprises more than 200 spending categories, facilitating comparisons to detect price trends. Although data is reported monthly, only the third-quarter CPI-W readings (July through September) influence the COLA calculation. If the average for this period in 2025 exceeds the same period in the previous year, beneficiaries will receive a raise in 2026.

A historic expansion of the U.S. money supply sent Social Security’s COLAs soaring in recent years. US Inflation Rate data by YCharts.

Recent COLA Updates Show Potential Increases for Retirees

COLAs during the 2010s were underwhelming. In years like 2010, 2011, and 2016, deflation led to no adjustments at all. The smallest positive COLA on record (0.3%) was granted in 2017. However, recent years have seen notable changes due to an unprecedented expansion of the U.S. money supply during the COVID-19 pandemic, which led to increased inflation rates.

This surge resulted in COLAs of 5.9% in 2022, 8.7% in 2023 (the highest increase in 41 years), followed by 3.2% in 2024 and 2.5% in 2025. To provide context, the average COLA since 2010 stands at 2.3%, and many beneficiaries are hopeful for another substantial increase in 2026.

After the recent inflation report from the Bureau of Labor Statistics (BLS), The Senior Citizens League (TSCL) raised its 2026 COLA forecast to 2.3%, a slight increase from 2.2% estimated the previous month. This forecast would lift the average monthly retired-worker benefit above $2,000. Meanwhile, independent policy analyst Mary Johnson has estimated the 2026 COLA at 2.2%, up from 2.1% before the January inflation report.

It’s important to note that both analysts have indicated their projections may change as President Donald Trump’s tariffs affect goods and services costs, with a 10% global tariff set to take effect on April 2nd. With this in mind, the COLA for 2026 is potentially on the rise.

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Challenges Persist Despite Promising COLA Forecasts

Even as the 2026 COLA forecast provides some optimism, a broader perspective reveals a less favorable reality. The objective of COLA is to help seniors keep pace with inflation and maintain their purchasing power. Unfortunately, the CPI-W is not without flaws, causing a steady decline in the purchasing power of Social Security benefits since 2000.

The CPI-W focuses on urban wage earners and clerical workers, which does not accurately reflect the spending habits of most Social Security beneficiaries—seniors who are typically not part of the workforce. Retirees allocate a larger portion of their income to housing and healthcare costs compared to younger Americans, yet the CPI-W does not fully account for these priorities.

According to a July 2024 analysis from TSCL, the purchasing power of a Social Security dollar has decreased by 20% since 2010. Despite increasing COLA forecasts, Johnson’s estimate of 2.2% and TSCL’s 2.3% projection fall short of the alarming inflation rates for medical care services (3%) and shelter (4%), as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

If the expenses that matter most to retirees continue to escalate faster than the COLAs, there’s a strong likelihood Social Security income will keep losing purchasing power.

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