Retirees who collect Social Security are going to get a Cost of Living Adjustment (COLA) in 2026. The exact amount of that COLA won’t be announced until October 24, 2025, because that’s when the data needed to determine the Cost of Living Adjustment becomes available.
Getting more money is usually considered to be a good thing. After all, who doesn’t want extra cash deposited into their bank account? Unfortunately, the upcoming COLA announcement is actually not good for seniors. Here’s why that’s the case, along with some insight into what retirees can do to cope with the disappointing COLA news.
Why the 2026 COLA is likely to be bad news for retirees
Although there’s no official announcement yet, there are plenty of projections that have already been made by experts regarding how big the Social Security benefit increase will be next year. For example, the Senior Citizens League, a major senior advocacy group, has projected that Social Security recipients are in line for a 2.7% COLA, or raise as it’s more commonly called.
This is a bigger benefits bump than retirees enjoyed in 2025, when seniors and others collecting Social Security benefits saw their payments go up by 2.5%. So, while it’s smaller than some of the COLAs in the aftermath of the pandemic, which were the highest they had been in decades, the 2026 raise is going to give seniors more extra money in their checks than the 2025 raise did.
Retirees shouldn’t be excited about this news, though, and there’s a simple reason why not.
Cost-of-Living Adjustments are not like traditional raises, where you’re rewarded for performing well at work and given more money because of it. Instead, COLAs are intended only to help benefit recipients avoid losing buying power due to the impact of inflation. The amount of the COLA is determined based on how much the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) reveals that prices rose during the third quarter of the year. So, a larger COLA means that the cost of goods and services is going up more.
While Social Security benefits are protected against inflation, the rest of the money seniors have available to them usually isn’t. Money that is invested or held in savings ends up eroding in value or earning smaller real returns when inflation surges. As a result, seniors end up with less buying power. Not only that, but the COLA formula isn’t a perfect one, and it ends up undercounting some of the inflation seniors actually experience. That happens because the formula underestimates the share of seniors’ money that goes towards housing and healthcare — which are two areas where prices tend to increase faster than the overall rate of inflation.
So, while seniors will get a bigger bump in their benefits, the overall impact of the high inflation that leads to this big COLA isn’t likely to be good for their financial situation.
How seniors can stay financially secure during periods of high inflation
This could mean doing things like eating more meatless meals or using coupons to save at the grocery store, or it could mean traveling less or reducing spending on dining out. The fact is that inflation has remained stubbornly high in the post-COVID world, and while things are improving slowly, it remains above the 2% target inflation rate set by the Federal Reserve. Seniors have to cope with this reality and adjust accordingly to ensure that the price surges don’t derail their financial security over the long term.
For retirees who need help adjusting their budget and ensuring they are maintaining a safe withdrawal rate, a financial advisor can be an invaluable resource. An advisor can help with all aspects of financial management, from deciding how best to put a Social Security raise to work to ensuring that your budget makes good sense and your retirement accounts last as long as you do.
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