Social Security 2026 Cost-of-Living Adjustment (COLA) Update: A Bigger Increase Could Be on the Horizon
Key Highlights:
The latest projection for the 2026 Social Security COLA is 0.2% higher than previous estimates.
COLAs are directly linked to inflation, meaning higher COLAs often indicate rising living costs.
Many seniors advocate for a change in COLA calculations to better maintain their purchasing power.
A Look Back at the 2025 COLA: A Disappointing Increase
If you were frustrated by Social Security’s 2025 cost-of-living adjustment (COLA), you’re not alone. The 2.5% increase translated to an average monthly benefit boost of just $49, a rise that many retirees found inadequate given the increasing costs of essential goods and services.
With eyes now on the 2026 COLA, there’s hope for a more favourable adjustment. Though the final figure is yet to be determined, early projections indicate a slightly larger increase than initially anticipated. However, whether this is good news depends on how inflation behaves.
Projected 2026 COLA Sees a Small Increase
The government calculates COLAs by comparing third-quarter inflation data—July, August, and September—between consecutive years. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is the benchmark used for these calculations.
For example, the 2.5% COLA for 2025 was derived from comparing third-quarter CPI-W data between 2023 and 2024. The Social Security Administration (SSA) will follow the same process for the 2026 COLA once the September 2025 CPI-W figures are available on 15 October 2025.
In the meantime, independent organisations such as The Senior Citizens League (TSCL) provide early estimates. Using factors like CPI-W trends, Federal Reserve interest rates, and national unemployment rates, TSCL adjusts its predictions monthly.
January 2025 projection: 2.1% COLA increase.
February 2025 update: Revised to 2.3%.
If this projection holds, the average monthly benefit would increase from $1,979 in January 2025 to $2,025 per month in 2026. However, this number could fluctuate as more economic data emerges.
A Larger COLA Isn’t Always Good News
While many assume a bigger COLA means more money in their pockets, the reality is more complex. COLAs are tied to inflation, meaning an increase in benefits often reflects a rise in the cost of living. This means retirees might not actually experience an improvement in their financial well-being.
For instance, TSCL found that despite regular COLA adjustments, Social Security benefits have lost 20% of their purchasing power since 2010. Rising prices in essential areas like housing, healthcare, and groceries often outpace COLA increases.
Should the Government Use a Different Inflation Measure?
One of the main criticisms of the current COLA calculation method is its reliance on CPI-W, which excludes retired households from its dataset. Instead, some argue that using the Consumer Price Index for the Elderly (CPI-E)—which specifically tracks senior spending—would lead to more accurate adjustments.
Studies indicate that using CPI-E instead of CPI-W would have resulted in higher COLAs in seven of the last ten years. This is because seniors typically spend more on:
Healthcare (which has higher inflation rates than other categories).
Prescription medications.
Housing and long-term care.
Some members of Congress have proposed switching to CPI-E as part of broader Social Security reforms, especially to address the system’s estimated $23 trillion funding shortfall. However, no legislative progress has been made on this front yet.
What’s Next for Social Security Beneficiaries?
For now, Social Security recipients will need to wait for more economic data before the 2026 COLA figure becomes clearer. As we approach October 2025, more precise estimates will emerge, allowing retirees to plan their budgets accordingly.
In the meantime, seniors should consider additional financial planning strategies to maintain their purchasing power in the face of inflation.
Sources:
The Senior Citizens League (TSCL)
U.S. Social Security Administration (SSA)
Bureau of Labor Statistics (BLS)