The forecast for the Social Security cost-of-living adjustment (COLA) for 2026 has been revised upwards. The COLA is now estimated at 2.3%, up from a previous 2.1% forecast. This adjustment would add an estimated $45.51 per month to the average retired worker’s benefit, raising it just above the $2,000/month threshold.
The COLA is determined based on inflation data, specifically the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter (July through September). If prices rise compared to the same period the previous year, beneficiaries get a raise to preserve their purchasing power. In 2025, beneficiaries received a significant increase, resulting in about $59 more per month for the average retiree.
The potential 2.3% increase for 2026 is slightly below that but remains above the long-term COLA average since 2010. While a higher COLA may sound like good news, experts warn that it may still fall short of actual inflation experienced by older Americans.
Social Security COLA projections adjust
Key categories of spending for seniors, such as shelter and medical care services, are rising faster than the projected COLA:
Shelter inflation: Up 4.4% over the last year
Medical care services: Increased 2.7%
CPI-W (used for COLA): Weighed toward working-age expenses, not retirees
These cost increases represent core spending areas for older people, yet they exceed the projected 2.3% COLA. TSCL reports that retirees have lost 20% of their buying power since 2010, even with recent larger COLAs. “Even with annual increases, Social Security dollars aren’t stretching far enough,” noted TSCL analysts.
Many retirees rely heavily on Social Security, with Gallup surveys showing 80% to 90% of older Americans count it as a primary or secondary income source. With shelter and healthcare costs continuing to rise, even small shortfalls in COLA adjustments can strain tight budgets. Without a significantly higher COLA or a drop in senior-relevant inflation, retirees may continue to lose purchasing power year after year.
While the final COLA won’t be announced until October 2025, seniors can prepare by:
Reviewing their budget in light of rising housing and healthcare expenses
Tracking inflation trends, especially for shelter and services
Staying informed about SSA updates and advocacy group forecasts
The projected Social Security COLA for 2026 may deliver another small bump in benefits. However, if costs for essentials continue to rise faster than the official inflation formula accounts for, retirees could see their buying power decline yet again. Beneficiaries should remain vigilant and informed, especially as debates over Social Security’s future—and its funding—continue in Washington.
Image Credits: Photo by Markus Spiske on Unsplash
