Concern Grows Among Seniors Over Future Social Security COLA Adjustments

When the Social Security Administration (SSA) announced in October that seniors would receive a 2.5% cost-of-living adjustment (COLA), many older Americans expressed disappointment. Historically, a 2.5% increase is not bad; however, compared to more recent adjustments, it appears minimal.

Now that seniors have coped with their 2.5% COLA for several months, attention is shifting toward the 2026 COLA, with hopes for a better increase.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

However, forecasts for 2026 are not encouraging. The nonpartisan Senior Citizens League recently projected a COLA increase of only 2.3% for Social Security benefits, based on current inflation trends.

This projection is disappointing for those already dissatisfied with the previous increase. Nevertheless, there is uncertainty surrounding this estimate; the actual 2026 Social Security COLA could still be more substantial.

Potential Resurgence of Inflation

The Federal Reserve has worked diligently to curb inflation, raising interest rates nearly a dozen times in 2022 and 2023, followed by a few rate cuts toward the end of 2024.

Yet, during its most recent meeting, the Fed paused interest rate hikes, signaling that it may continue this approach in its mid-March meeting. This pause occurs as inflation remains persistently high.

Inflation might rise again in 2025, potentially driven by tariffs that could increase consumer goods prices and lead to product shortages—conditions that typically contribute to inflationary pressures.

If inflation escalates as 2026 approaches, it might result in a larger Social Security COLA, but a rise in inflation isn’t necessarily advantageous.

The Complex Nature of COLAs

While larger Social Security increases can be perceived positively, they are a double-edged sword. Given that COLAs are tied to inflation, higher adjustments usually follow periods of significant inflation. This pattern could mean that seniors may fare better in environments with low inflation and smaller benefit increases.

Official figures for the 2026 COLA won’t be available until October, as they are calculated from third-quarter inflation data. Nevertheless, seniors should brace themselves for either a small adjustment or an inflationary environment that might necessitate a larger raise.

For those on fixed incomes, making financial adjustments can be challenging. Retirees should consider part-time work to supplement their income.

Fortunately, the SSA permits beneficiaries to work while receiving benefits. However, retirees under full retirement age may see benefits withheld if their earnings exceed certain limits. Therefore, anyone considering returning to work should familiarize themselves with SSA regulations.

The $22,924 Social Security Bonus That’s Overlooked

If you’re among the many Americans who feel behind on retirement savings, there are lesser-known “Social Security secrets” that could enhance your retirement income. For instance, understanding how to maximize benefits could earn you as much as $22,924 more annually. Discovering these strategies may provide the financial peace of mind many seek. Click here to learn more about these opportunities.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.