The Social Security Administration (SSA) has announced that the average retired worker’s benefit will surpass $2,000 monthly for the first time in 2026. This milestone is due to a forecasted cost-of-living adjustment (COLA) of around 2.2%, according to The Senior Citizens League (TSCL), a nonpartisan senior advocacy group. If the 2.2% COLA estimate holds, it would increase the average retired worker’s check by about $44 per month.
Workers with disabilities and survivor beneficiaries would see their monthly payouts increase by $35 and $34. One factor contributing to higher-than-average COLAs in recent years is shelter inflation. Shelter costs, the highest-weighted expense in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rose by 4.2% over the last year, according to the Consumer Price Index for All Urban Consumers (CPI-U).
Despite the prospect of the average retired worker benefit surpassing $2,000 per month, the reality is less rosy for several reasons.
COLA impact on retirement benefits
The CPI-W often fails to reflect expenditures most relevant to retirees, such as shelter and medical care, which command a larger share of seniors’ budgets than working-age Americans.
Consequently, even with COLA adjustments, retirees may still face a loss in purchasing power if inflation in these sectors outpaces the COLA. TSCL’s analysis in July 2024 highlighted that the buying power of a Social Security dollar has declined by 20% since 2010. This trend will likely continue, with shelter and healthcare costs rising faster than the projected COLA.
The Old Age and Survivors Insurance Trust Fund (OASI), which pays out benefits to retirees and survivors, is projected to deplete its asset reserves by 2033. Without legislative intervention, significant benefit cuts may be required to sustain payouts through 2098, with estimates suggesting cuts of up to 21% might be necessary. A higher COLA, while beneficial in the short term, could expedite these financial challenges and bring about the necessity of sweeping benefit cuts sooner.
In conclusion, while the historic COLA for 2026 marks a significant milestone, it raises concerns about the long-term sustainability of Social Security benefits and the overall financial security of retirees.
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