Social Security's anticipated Cost-of-Living Adjustment (COLA) for 2026 is set to break records -- but even this increase is unlikely to sufficiently support retirees

For the past 85 years, Social Security has served as a crucial source of income for older workers who are no longer able to support themselves. According to nearly 25 years of annual Gallup surveys, between 80% and 90% of retirees depend on their Social Security payments to cover at least part of their living costs.

For the 53.3 million people receiving retired-worker benefits, the annual announcement of the cost-of-living adjustment (COLA) each October (set for Oct. 15 this year) is especially significant.

Although independent predictions are widely suggesting that Social Security is about to make history for the first time in nearly three decades, this anticipated milestone is still unlikely to fully meet the needs of retirees who rely on these benefits as their main financial support.

Why the COLA for Social Security Is So Critical

Before looking deeper, it’s important to grasp what the cost-of-living adjustment means for Social Security recipients and why it’s so vital.

In essence, the COLA is designed to help beneficiaries keep pace with inflation by providing an almost yearly boost to their payments from the Social Security Administration (SSA).

For example, if the price of a standard mix of goods and services frequently bought by retirees rises by 2% in a year, beneficiaries would lose purchasing power if their Social Security checks stayed the same. The COLA is intended to offset this by increasing benefits to counteract inflation.

Until 1975, there was no mechanism within the SSA to ensure that recipients maintained their purchasing power. After the 1940s passed without a single COLA, Congress approved the largest increase ever—a 77% boost—in 1950. From the first benefit check in January 1940 through 1974, Congress only authorized 11 COLAs, all through special sessions.

The annual adjustments we have today started in 1975, when the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was adopted as Social Security’s inflation measure. The CPI-W covers over 200 distinct spending categories, each given its own weight, allowing for a single monthly figure that makes it easy to compare prices year over year and determine whether inflation or deflation is occurring.

We’re currently in the main period for determining the COLA, with only July through September’s CPI-W numbers (the third quarter) factored into the calculation. If the average CPI-W for Q3 2025 is higher than the same period in 2024, beneficiaries should see their payments rise in 2026.

Recent increases in the overall inflation rate have resulted in notably higher COLAs for Social Security. US Inflation Rate data by YCharts.

Several Forecasts Suggest a Historic COLA for the First Time in 29 Years

Now that we’ve covered the importance of COLA, let’s look at what retirees might expect in the coming year.

Following the release of the August inflation data by the U.S. Bureau of Labor Statistics, two separate forecasts were updated. For the first time in five months, the nonpartisan Senior Citizens League (TSCL) did not increase its estimate for the 2026 COLA by 0.1%. Instead, TSCL maintained its earlier projection of a 2.7% increase for next year.

At the same time, independent Social Security and Medicare policy expert Mary Johnson, who retired from TSCL in early 2024, raised her projection for the 2026 COLA by 0.1% to 2.8%.

If the actual COLA announced on Oct. 15 aligns with these predictions, it would mark the fifth year in a row that recipients have received at least a 2.5% increase. This follows COLAs of 5.9% in 2022, 8.7% in 2023 (the largest in 41 years), 3.2% in 2024, and 2.5% in 2025.

It’s been almost 30 years since Social Security beneficiaries last saw at least five consecutive years with a COLA of 2.5% or higher. Between 1988 and 1997, annual COLAs ranged from 2.6% to 5.4%. Therefore, it’s highly likely that a new record will be set when the SSA announces the 2026 adjustment next month.

Based on projections from TSCL and Johnson, a 2.7% to 2.8% COLA would mean an average monthly increase of $54 to $56 for retired-worker beneficiaries in 2026. For beneficiaries who are disabled or survivors, the average monthly payment would rise by $43 to $44 next year.

COLA Adjustments Often Fall Short for Retirees

On the surface, Social Security’s 53.3 million retired-worker beneficiaries look set for another year of a higher-than-average COLA. However, a closer look at the projected increase for 2026 reveals that many older recipients will likely be disappointed.

Firstly, the CPI-W, which Social Security relies on to measure inflation, has inherent shortcomings that have eroded retirees’ purchasing power for over ten years. TSCL’s research found that the value of a Social Security dollar dropped by 20% between 2010 and 2024. To put it another way, $100 in Social Security benefits in 2010 would only buy $80 worth of the same goods in 2024.

This ongoing decline is because the CPI-W tracks spending patterns of a group that makes up a small fraction of Social Security recipients. As the name suggests, the CPI-W is based on the expenses of urban wage earners and clerical workers—many of whom are working-age people not currently receiving Social Security.

In contrast, 87% of traditional Social Security beneficiaries are at least 62 years old. These individuals dedicate a greater portion of their budget to housing and health care compared to younger earners. Unfortunately, the CPI-W does not reflect this higher weighting for seniors.

What’s more, the year-over-year inflation rate for housing and medical care services has consistently outpaced the COLA received by retirees. As long as these two key costs keep rising faster than benefit increases, seniors’ purchasing power is likely to keep shrinking.

The second factor likely to reduce the impact of the 2026 COLA for retirees is the anticipated jump in Medicare Part B premiums, which cover outpatient medical services.

The majority of Social Security recipients enrolled in traditional Medicare have their Part B premiums taken out of their monthly benefit automatically. After two consecutive years of 5.9% increases, the Medicare Trustees Report predicts a hefty 11.5% rise in 2026, taking the monthly premium to $206.20. This could offset much or even all of the 2026 COLA for many retired workers.

So, despite what looks like a historic COLA in 2026, retirees may still see little actual improvement in their financial situation.