On April 12, 2025, the new forecasts for the 2026 Social Security cost-of-living adjustment (COLA) have raised worries among professionals and the elderly. While a higher COLA often seems to be a good thing, this time, the situation is somewhat different. It is likely that the increase in 2026 still will not be enough to stop the increasing expenses of many Americans, especially in healthcare and housing.
The U.S. Bureau of Labor Statistics (BLS) announced a 2.8% unadjusted annual increase in the Consumer Price Index (CPI), but there is a lot more to it than that. The forecast for the 2026 COLA has been readjusted to 2.2% which is down with revisions of inflation statistics, although slightly, from the previous estimation of 2.3%.
What is COLA and Why Does It Matter?
COLA is an abbreviation of Cost-of-Living Adjustment. It is a yearly increase that is added to Social Security payments so that retirees and other beneficiaries can maintain their standard of living despite inflation. The size of the change is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — only, the average of July through September each year.
On the other hand, the method has long been the subject of the criticisms. The CPI-W is based on the spending patterns of working-age Americans, not retirees. It therefore often fails to identify the actual effects of inflation on the elderly, mainly due to their higher consumption of health care and shelter products. According to the majority of experts, the CPI-E, the focus of which is on people aged 62 and over, should be the one used by the government. However, nothing has changed so far.
What is COLA and Why Does It Matter?
What You Can Expect for the Social Security in 2026
As reported by the Senior Citizens League, the average monthly Social Security benefit is $1,980.86. If the estimated 2.2% COLA materializes, there will be an approximately $44 monthly increase in payments in 2026.
Even with the official average to be just above $2,000 for the first time, a lot of retirees are still complaining about its adequacy. Most of the 2.5% COLA raise gained back in 2025 was nullified by the higher amount of Medicare Part B premiums, unfortunately, leaving very little additional cash for other essentials.
If the charges imposed by Medicare should ratchet up in 2026, which would not be out of the question, it will be very likely that whatever more is due to the COLA raise will be given back before it takes effect.
Why a Higher COLA Isn’t Always Good for You
But it is not always a plus to be given a COLA raise; most of the time, it is more of a reduction. A higher inflation rate is oftentimes manifested by a higher COLA which, on the other hand, causes a rise in the cost of everyday items like groceries, rent, and utilities. A fatter check is still the plight of an employee even in light of all this.
Even larger COLAs can have unwelcome results. A case in point is that additional social security income could disqualify some seniors from receiving food assistance or being part of the Medicare Savings Programs. Consequently, other benefits will be lost.
According to MarketWatch, there are financial experts who are sounding the alarm that though the rate of inflation is going down, the vast majority of the elderly still find that they have no more purchasing power now than they did before. The health care costs are constantly going up, surpassing the pace at which the COLA is able to satisfy the problem.
Will the Government Change the Way they Calculate COLA?
For years, the supporters have been requesting the legislators to change the formula that is used for the computation of COLA. One of the leading arguments to use the CPI-E index, which represents the spending of seniors more adequately, has been there for a generation. Yet, despite the backing from the National Committee to Preserve Social Security & Medicare and the alike groups, the change has remained a moot political issue over the years.
With 72.5 million Social Security beneficiaries nowadays, the situation is becoming increasingly tense. As to whether or not the Congress can meet the deadline to change something for the 2026 season is still an open question.
Prospects for 2026
- Estimated COLA: 2.2%
- Anticipated monthly gain: ~$44
- The average benefit could be higher than $2,000/month for the first time
- Healthcare and Medicare costs might diminish the real benefit
- Still, no modification of the method of the calculation of COLA has been recorded yet
We would be able to see the real COLA at the end of the year 2026 only by watching the CPI-W values of July, August, and September 2025 as they are released. In the meantime, the pensioners can only wish for higher incomes not to be eaten up by higher expenses.
For continuous information, go to the Social Security Administration’s COLA page.
