Natalia
For the 53.1 million retired Americans who received a Social Security check in June, these payments are often indispensable.
The average monthly benefit currently stands at $2,005, which may seem modest, yet 80% to 90% of retirees depend on it to meet their living expenses.
Gallup surveys spanning nearly 25 years confirm that the vast majority of seniors rely heavily on these benefits.
For them, the most pressing question remains: how much will their monthly check increase?
This makes the Social Security Administration’s (SSA) annual cost-of-living adjustment (COLA) announcement in October one of the most anticipated updates of the year.
Why the COLA Matters So Much
Protecting Retirees from Inflation
The COLA is designed to protect beneficiaries’ purchasing power. If the cost of goods and services rises by 2.5% in a year, benefits should increase by the same percentage.
This annual “raise” ensures that seniors can continue to afford essentials despite inflation.
Historical Development of COLA
- Before 1975: Adjustments weren’t formula-based; only 11 special adjustments occurred in 35 years. The largest came in 1950, when benefits rose 77%.
- Since 1975: The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has determined COLAs. This index tracks over 200 cost categories, condensing them into a single figure to compare inflation year-over-year.
How COLA is Calculated
- Only July, August, and September CPI-W readings (third quarter) are used.
- If the average exceeds the previous year’s Q3 reading, benefits increase.
- The percentage difference is rounded to the nearest tenth of a percent to finalize the COLA.
This system ensures adjustments mirror real-world cost changes but does not fully account for retirees’ unique spending habits.
Recent Trends and the 2026 COLA Outlook
Recent COLA Increases
The past four years have delivered substantial increases due to high inflation, particularly during and after the COVID-19 pandemic:
- 5.9% in 2022
- 8.7% in 2023 (largest in 41 years)
- 3.2% in 2024
- 2.5% in 2025
Each exceeded the 16-year average COLA of 2.3%, underlining how recent inflationary pressures have boosted benefits.
Historic Streak Ahead
If projections hold, 2026 will mark the fifth consecutive year with a COLA of at least 2.5%—something not seen since 1988–1997, when annual adjustments ranged between 2.6% and 5.4%.
Current Forecasts for 2026
- The Senior Citizens League (TSCL): 2.7%
- Policy analyst Mary Johnson: 2.7%
This estimate, fueled by modest inflation linked to tariffs introduced under former President Donald Trump, would provide an average $54 monthly increase for retired-worker beneficiaries.
The No-Win Reality for Retirees
Shrinking Purchasing Power
Despite these adjustments, retirees face a loss of buying power. TSCL reports that between 2010 and 2024, the value of a Social Security dollar fell by 20%.
In real terms, what $100 bought in 2010 only covers $80 worth of goods in 2024.
This decline is partly due to flaws in using the CPI-W, which reflects the spending habits of working-age Americans rather than retirees.
Notably, 87% of Social Security beneficiaries are 62 or older, yet the index ignores the higher costs they face, especially for healthcare and housing.
Rising Medical and Housing Costs
Two critical expenses—shelter and medical care services—continue to rise faster than COLA adjustments.
To make matters worse, a potential increase in Medicare Part B premiums, which cover outpatient services, could offset much of the anticipated benefit increase in 2026.
While the projected 2026 Social Security COLA of 2.7% promises another above-average increase, retirees may still feel financially squeezed.
Inflation in essential categories like housing and healthcare, coupled with rising Medicare premiums, means that many seniors will see little improvement in their purchasing power.
The COLA may offer relief on paper, but in practice, retirees remain caught in a no-win scenario where expenses outpace benefit increases.
Frequently Asked Questions
The 2026 COLA is projected at 2.7%, translating to an average $54 monthly increase for retired workers.
The COLA is based on the CPI-W readings from July, August, and September. If the average exceeds the prior year’s Q3 figure, benefits rise by that percentage, rounded to the nearest tenth.
The CPI-W measures inflation based on working-age Americans’ spending, not retirees. Since seniors spend more on healthcare and housing, their real expenses often rise faster than the COLA increase.