For nearly 70 million individuals who received a standard Social Security payment in July, the year's most awaited date is drawing near.
On October 15, the Social Security Administration (SSA) will announce an array of anticipated updates to the program for 2026, most notably the cost-of-living adjustment (COLA). Since the majority of retirees depend to some extent on their monthly benefits to cover living expenses, knowing the upcoming year's payment amount is extremely significant.
Although the 2026 COLA for Social Security is on track to break records for the first time in almost thirty years, most recipients appear to be heading for a tough situation next year.
Image source: Getty Images.
What is the role of Social Security's COLA?
The much-discussed COLA is a mechanism the SSA uses to help recipients keep up with inflation and the rising cost of living.
In theory, if the overall price of goods and services that seniors regularly buy increases by 3% over a year, Social Security payments should rise by the same percentage to maintain purchasing power. The COLA serves as an annual "raise" for most beneficiaries to help them cope with inflation's impact on their finances.
Prior to 1975, Social Security did not use a formal inflation index or COLA formula. Instead, Congress would occasionally approve benefit increases without a set pattern. For example, there were no benefit hikes in the 1940s, followed by a record 77% increase in 1950.
Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has served as the program's inflation gauge, allowing for annual COLAs if needed. The CPI-W tracks over 200 categories of spending, each with its own weight. These weights allow the CPI-W to be condensed into a single figure each month, making it easy to compare year over year and see if inflation or deflation is occurring.
Because Social Security’s COLA calculation only uses CPI-W data from the third quarter (July through September), we are about a month away from the final piece needed to determine the 2026 COLA: the September inflation report.
A sharp increase in the U.S. money supply has led to larger Social Security COLAs in recent years. US Inflation Rate data by YCharts.
On paper, Social Security’s 2026 COLA is set to make history
Throughout most of the 2010s, Social Security COLAs were largely unremarkable. That decade included three years with no COLA at all due to deflation (2010, 2011, and 2016), and the lowest positive COLA ever—just 0.3% in 2017.
However, since the onset of the COVID-19 pandemic, there has been a significant change. An unprecedented growth in the U.S. money supply was soon followed by the highest inflation in over 40 years. The result has been four straight years of above-average COLAs: 5.9% in 2022, 8.7% in 2023, 3.2% in 2024, and 2.5% in 2025. For comparison, the average COLA over the previous 16 years was 2.3%.
Multiple independent forecasts suggest the 2026 COLA will make history by reaching or exceeding 2.5% for a fifth year in a row. The last time beneficiaries experienced at least a 2.5% increase for five straight years was from 1988 to 1997, when annual COLAs ranged between 2.6% and 5.4%.
After the August inflation report, The Senior Citizens League (TSCL), a nonpartisan seniors' advocacy organization, maintained its 2026 COLA forecast at 2.7%. Meanwhile, independent Social Security and Medicare analyst Mary Johnson increased her projection to 2.8%.
While these figures could still shift, the moderate inflation linked to former President Donald Trump’s tariffs and trade policies is expected to keep the 2026 COLA at or above 2.7%.
If TSCL’s forecast is correct, the average retired worker's benefit would rise by $54 per month in 2026. For disability and survivor beneficiaries, the typical monthly payment would grow by about $43.
Image source: Getty Images.
Many of Social Security’s 70 million recipients face a double blow in 2026
Despite the promising numbers, the real-world impact of the 2026 COLA is far from ideal.
The first issue older recipients will encounter is a likely reduction in their buying power. A TSCL study published last year found that the value of a Social Security dollar fell by 20% between 2010 and 2024.
The CPI-W generally does a poor job reflecting the spending patterns most relevant to seniors. It is designed to measure the expenses of "urban wage earners and clerical workers," who are often working-age people not yet drawing Social Security. Their spending habits differ significantly from the 87% of Social Security recipients who are 62 or older.
According to the Consumer Price Index for All Urban Consumers (CPI-U), which is similar to the CPI-W, the costs of housing and medical services have been rising faster than the COLA most Social Security recipients are expected to get. As long as these two major expense categories outpace Social Security’s COLA, it is very likely that recipients’ purchasing power will continue to erode.
The second part of this double blow concerns those enrolled in both Social Security and traditional Medicare. Most of these individuals have their Medicare Part B premium—covering outpatient care—automatically taken from their monthly benefits.
The Medicare Trustees Report projects that the Part B premium will jump by 11.5% in 2026, reaching $206.20 a month. This comes after two consecutive years of smaller 5.9% increases. As a result, many older beneficiaries will see much or all of their 2026 COLA eaten up by the substantial rise in Medicare Part B costs.
Sometimes, moments that look historic on the surface come with significant downsides.
