There’s a Big Problem With Social Security’s 2026 COLA

By Christy Bieber Published Oct 18, 9:00AM EDT

Key Points

Social Security’s 2026 COLA is almost assuredly going to fall short of protecting retirees from rising costs.
COLAs are based on a consumer price index that tracks price increases for urban wage earners and clerical workers.
The formula significantly underestimates the actual price increases retirees experience.

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There’s a Big Problem With Social Security’s 2026 COLA — © Canva | ferrantraite from Getty Images Signature and Kameleon007 from Getty Images Signature

Social Security’s Cost of Living Adjustment for 2026 is slated to be announced on October 24, 2025. While there won’t be official answers on what the benefits increase is going to look like, current projections set it at 2.7%.

A 2.7% benefits bump is bigger than the raise in 2025, and it may seem like a great thing for retirees to get so much extra money in their checks in the coming year. However, the reality is, there is a big problem with the 2026 COLA, and it’s a problem that could come back to haunt retirees.

Here are the details of what the problem is, along with some tips on what Social Security retirees can do to cope with the troubling situation.

This is the big problem with the 2026 COLA

The big problem with the Social Security Cost of Living Adjustment is that the COLA is not serving the purpose that it was intended to serve.

The reason that Cost of Living Adjustments are built into Social Security is to try to protect seniors from the impact of inflation. Since the cost of goods and services goes up all the time, benefits have to go up too. If they didn’t increase, then retirees would find themselves bringing home the same amount of money from their retirement checks but able to buy less with it every single year. That’s not a sustainable situation, as their checks would be worth very little once they were around 15 or 20 years into retirement.

Unfortunately, the COLA isn’t actually helping retirees to maintain their buying power because it is not accurately measuring the inflation that they experience. Retirees tend to spend a lot of their money on things that become more expensive each year at a faster rate than the typical items people buy. For example, the costs of healthcare tend to go up far faster than the overall inflation rate, and housing has also become a lot more expensive in recent years than the overall inflation rate. And retirees devote a disproportionate share of their income to these costs.

The formula used to determine the Cost of Living Adjustments sadly does not weigh these categories of spending as heavily as it should in determining how fast prices are rising. That’s because the measure of inflation that is used to determine the COLA is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-W measures how much costs are increasing in a basket of goods and services used by urban wage earners and clerical workers — not the goods and services actually used by the seniors collecting benefits.

The result of this has had serious consequences for retirees. In fact, a senior advocacy group called the Senior Citizens League has analyzed the situation and found that benefits have lost 36% of their buying power since 2000. That is a lot of money that seniors don’t get. And since the CPI-W formula is once again being used to determine the COLA retirees will receive in 2026, this problem is going to persist and probably get worse next year.

What can retirees do about this issue?

August 14. Hand writing text Social Security Day on calendar date. Save the date. Holiday. Important date. Day of the year concept.

Sadly, there is very little retirees can do about the fact that their benefits are losing ground. While there were a few proposals in the past to change the COLA formula to give retirees raises based on a consumer price index that measured the spending of elderly people, those proposals have gone nowhere in Congress. Since Social Security is at risk of running short of money soon anyway, any proposals that would make the program more expensive — like giving seniors larger raises — are probably a nonstarter right now. So, retirees just have to know and accept the fact that their Cost of Living Adjustment isn’t really going to do what it is supposed to.

Seniors can try to adjust their budget to account for inflation, though, so they don’t end up going into debt or draining retirement accounts too quickly in order to try to maitnain a living standard that may no longer be affordable for them, given recent inflation surges that eroded their buying power in the post-pandemic era. Making these adjustments could help retirees preserve their nest egg. A financial advisor can help with this process, working with seniors to determine a safe withdrawal rate from retirement plans and to make sure they have a budget that makes sense given the size of their account distributions and their Social Security checks.