Disappointing Social Security Adjustments Prompt Concerns for 2026
Many retirees were left unsatisfied by the 2025 Social Security cost-of-living adjustment (COLA), which increased benefits by only 2.5%, adding just $49 to monthly checks. As living expenses have risen more sharply for some, this increase has felt inadequate for many who rely heavily on these payments for their day-to-day needs.
Hope for a Higher 2026 COLA Amidst Economic Fluctuations
Anticipating the 2026 COLA, numerous observers are hopeful for better news. While the final figures won’t be revealed until later, recent estimates indicate the potential for a larger increase than initially expected. However, opinions on whether this is indeed favorable can vary.
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2026 COLA Projections Show a Slight Increase
The government figures COLAs based on third-quarter inflation data observed in July, August, and September, employing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for calculations. The recent gap between average CPI-W figures from 2023 and 2024 resulted in the 2.5% COLA for 2025. The Social Security Administration will repeat this process for 2026, relying on the CPI-W data set to be released on October 15, 2025.
While the exact COLA number for 2026 remains uncertain, The Senior Citizens League (TSCL), a nonpartisan group, attempts to forecast these adjustments using models that consider various economic indicators such as the CPI-W, Federal Reserve interest rates, and national unemployment rates. They update predictions monthly based on the newest available data.
Initial estimates for January 2025 suggested modest 2.1% growth, which improved to 2.3% in February. If this holds, the average monthly benefit of $1,979 in January 2025 may rise to approximately $2,025. Though subject to change, it’s notable that TSCL’s 2025 COLA predictions have been accurate within just 0.1% as of April 2024.
Understanding the Complex Relationship Between COLAs and Inflation
A larger COLA is typically a relief to many, yet the connection to rising costs complicates this notion. Essentially, the CPI-W is a measure of inflation; thus, significant increases often reflect higher living expenses that could negate the benefits of a larger COLA. Ideally, COLAs would track inflation precisely so that retirees maintain purchasing power, but reality tells a different story. According to TSCL, Social Security checks have lost 20% of their purchasing power since 2010, despite the adjustments.
This situation arises partly from the CPI-W excluding retiree households from its calculations. Instead, these households follow a different index known as the Consumer Price Index for the Elderly (CPI-E). Various proposed changes to incorporate the CPI-E could have yielded larger COLAs over the last decade, as seniors tend to spend more on healthcare among other necessities.
Some lawmakers advocate for switching to the CPI-E, listed as a potential part of broader reforms necessary to address the looming $23 trillion funding gap in the Social Security program. For the moment, anticipation builds as we approach October. Clarity about the 2026 COLA will come soon, urging careful planning for the upcoming budget year.
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