Social Security serves as the largest source of income for millions of retirees, yet many beneficiaries feel that their cost-of-living adjustment (COLA) fails to keep pace with inflation. A recent survey by The Motley Fool found that the majority of 2,000 retired workers believed that the 2024 and 2025 COLAs did not adequately reflect rising living costs.
Now, projections for 2026 indicate that next year’s COLA may be even smaller, potentially shrinking retirees’ purchasing power. The Senior Citizens League (TSCL), a nonpartisan advocacy group, has revised its COLA forecast downward to 2.2%, marking the smallest Social Security increase since 2021.
Here’s why this lower COLA could spell trouble for retirees and what it means for Social Security recipients going forward.
How Social Security COLAs Are Calculated
The Social Security Administration (SSA) adjusts benefits each year through cost-of-living adjustments (COLAs) to ensure payments keep up with inflation.
COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures price changes for goods and services. The CPI-W for the third quarter of the current year (July–September) is compared to the third quarter of the previous year, and the percentage increase determines the following year’s COLA.
For example, a 2.5% increase in the CPI-W in 2024 resulted in a 2.5% COLA for 2025.
However, some experts argue that the CPI-W does not accurately reflect retirees’ expenses, leading to an underestimation of true inflation for Social Security recipients.
Why the 2.2% COLA Forecast Could Be Bad News for Retirees
While COLAs are designed to match inflation, many seniors argue that they fail to cover the rising costs of essential expenses like housing and healthcare.
CPI-W inflation measured 2.7% in February 2025, down from 3.0% in January, leading TSCL to revise its 2026 COLA forecast from 2.3% to 2.2%. This may not seem concerning at first, but the real issue lies in how inflation affects retirees differently than younger workers.
CPI-W Does Not Reflect Senior Spending Habits
The CPI-W is based on the spending patterns of working-age adults, meaning it overweights certain categories like transportation and education, while underweighting essentials for retirees like housing and healthcare.
- Housing costs for seniors continue to rise – The housing component of CPI-W inflation increased by 3.7%, significantly higher than the overall 2.7% inflation rate.
- Medical costs are also increasing – The medical care component of CPI-W inflation increased by 2.9%, also above the average.
- Meanwhile, education and transportation costs have slowed, with education inflation declining by 0.1% and transportation rising just 1.8%.
The result? A COLA that underestimates real inflation for retirees.
Because Social Security bases COLAs on the CPI-W, rather than an index designed for retirees, seniors could see a real loss in purchasing power in 2026.
What This Means for Social Security Beneficiaries
If TSCL’s forecast holds, a 2.2% COLA in 2026 would be one of the smallest increases in recent years. This could mean Social Security benefits fail to keep up with rising costs, particularly for housing, healthcare, and other essentials.
For millions of retirees who depend on Social Security as their primary source of income, even a small miscalculation in COLA adjustments can have a big impact on their standard of living.
Example: How a 2.2% COLA Would Affect Benefits
| Current Monthly Benefit | Projected 2.2% COLA Increase | New Monthly Benefit |
|---|---|---|
| $1,500 | +$33 | $1,533 |
| $2,000 | +$44 | $2,044 |
| $2,500 | +$55 | $2,555 |
| $3,000 | +$66 | $3,066 |
While these increases may seem small, they fail to keep up with the rising costs of housing and medical expenses, which far exceed the 2.2% projected increase.
Will the 2026 COLA Increase Change?
The official COLA for 2026 will not be announced until October 2025, when the SSA finalizes inflation data from the third quarter.
If inflation accelerates later in the year, the COLA could end up higher than 2.2%. If inflation continues to slow, it’s possible that the COLA could be even lower than projected.
“We still have several months before the final numbers are set,” said a Social Security policy expert. “But if current trends hold, Social Security beneficiaries could be facing a real loss in buying power next year.”
Takeaways: How to Prepare for a Smaller Social Security COLA in 2026
✔ Social Security beneficiaries could see a smaller COLA in 2026, with TSCL forecasting a 2.2% increase—the smallest in five years.
✔ The CPI-W, which determines COLAs, does not accurately reflect the spending habits of seniors, particularly in housing and healthcare costs, leading to a potential loss in purchasing power.
✔ Retirees should plan accordingly, as Social Security may not fully keep pace with inflation in essential categories.
✔ The official COLA will be announced in October 2025, and inflation trends in the coming months will determine the final adjustment.
As Social Security remains the primary income source for millions of Americans, it is critical to ensure that benefit adjustments truly reflect the cost of living for retirees. Whether Congress addresses the CPI-W’s shortcomings remains to be seen, but for now, Social Security beneficiaries should be prepared for a potentially smaller increase in 2026.
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