For the fifth year in a row, Social Security benefits are projected to increase by at least 2.5%, a pattern not observed since the 1990s. The upcoming cost-of-living adjustment (COLA) for 2026 is currently estimated at 2.7%, according to recent forecasts. While this figure suggests continued upward movement, it offers limited insight into how well these adjustments actually reflect retirees’ real-world expenses.
In a mid-August update, Futbolete highlighted this projected increase while noting the broader context of persistent inflation and rising healthcare costs. The final COLA will be officially confirmed by the Social Security Administration in October 2025.
How COLA Works and Why It’s Falling Short
The Social Security Administration (SSA) adjusts retirement benefits each year using a formula based on inflation. Since 1975, these cost-of-living adjustments (COLAs) have been tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of broader inflation measures that reflects the spending of working Americans, not retirees.
Chiffres et données manquants: Before 1975, COLAs were issued only through special congressional action. Over a 35-year period, just 11 legislative adjustments were enacted. The most dramatic came in 1950, when benefits jumped 77%, reflecting the political and economic climate of the postwar era.
COLA Projections for 2026
Following a series of substantial adjustments during and after the COVID-19 pandemic, the projected 2026 COLA stands at 2.7%, according to both the Senior Citizens League (TSCL) and independent policy analyst Mary Johnson. This estimate has been revised upwards five months in a row, due to persistent inflationary pressures, including those attributed to former President Donald Trump’s tariffs.
If the projection holds, retirees would see their monthly Social Security checks increase by an average of $54.
Chiffres et données manquants: That increase would apply to a baseline average monthly benefit of $2,005, which over 53.1 million retired workers received as of June 2025, according to the SSA. Despite its modest size, nearly 80% to 90% of retirees depend on this payment to meet basic living expenses, based on nearly 25 years of annual polling by Gallup.
A Pattern Not Seen Since the 1990s
If the 2026 adjustment goes through as projected, it will mark the first time since 1988 to 1997 that COLAs of at least 2.5% have occurred five years in a row. During that decade, increases ranged between 2.6% and 5.4%, reflecting a different era of price stability and benefit policy.
Chiffres et données manquants: By comparison, the last four COLAs were:
- 5.9% in 2022
- 8.7% in 2023 — the largest in 41 years
- 3.2% in 2024
- 2.5% projected for 2025
Inflation Pressures vs Retiree Spending
Despite the consistency in COLAs, their effectiveness has eroded. TSCL reports that the purchasing power of Social Security dollars has declined by 20% from 2010 to 2024. This means that $100 in benefits in 2010 only buys $80 worth of goods and services in 2024, when adjusted for inflation.
Chiffres et données manquants: A core reason for this loss in real value is the CPI-W’s mismatch with retiree spending. The CPI-W tracks inflation among urban wage earners and clerical workers—a group that rarely includes those over age 62. Yet 87% of Social Security beneficiaries fall into that senior age group.
Medical Costs and Housing Drive the Gap Wider
Two of the fastest-growing cost categories for retirees—shelter and medical care services—are underrepresented in the CPI-W’s formula. Even if general inflation cools, these essential expenses may continue to rise. The projected 2.7% COLA for 2026 is likely to be offset, at least in part, by the annual increase in Medicare Part B premiums, which covers outpatient care and is automatically deducted from most beneficiaries’ monthly checks.
Chiffres et données manquants: The CPI-W is based on over 200 individually weighted cost categories, but does not assign sufficient weight to medical or housing costs, which consume a larger share of retired households’ budgets. Additionally, the COLA calculation is rounded to the nearest tenth of a percent, which may further understate minor fluctuations in inflation that nonetheless affect seniors.
Historical Comparison Highlights Structural Imbalance
The current system reflects a tension between economic policy, inflation control, and demographic realities. The expansion of the U.S. money supply during the pandemic—part of broader fiscal responses—triggered a wave of inflation that fueled the last several COLAs. But even as adjustments followed, the gap between indexed benefits and real-world costs has widened.
Chiffres et données manquants: The influence of COVID-era monetary expansion on COLAs remains underappreciated. The economic stimulus measures dramatically increased the M2 money supply, which contributed to inflationary pressure long after lockdowns ended.
Retirees Face Continued Strain Despite Upward Adjustments
COLAs are a critical tool for preserving retiree financial stability, but their effectiveness depends on how well they reflect real expenses. The persistence of under-weighted categories, combined with Medicare cost increases, means that even a historically rare five-year run of 2.5%-plus COLAs may not be enough to offset ongoing erosion in purchasing power.
Without reforms—such as indexing benefits to a more relevant measure like the Consumer Price Index for the Elderly (CPI-E)—future adjustments may continue to lag behind the needs of the population they are meant to serve.
