Social Security Retirees Have Two Big Numbers to Watch for for COLA Predictions

Social Security retirees will be getting a Cost of Living Adjustment in January, with a 2.8% raise coming for seniors. While this seems like a generous COLA on the surface, the reality is that Cost of Living Adjustments have not done their job in making sure that benefits keep pace with inflation, and the value of benefits has been falling over time. Sadly, the decline has been substantial, with the Senior Citizens League reporting that benefits today are worth around $0.80 on the dollar compared to their buying power in 2010. 

With COLAs so often falling short, many retirees are already on watch for what upcoming raises will bring — and that will be determined by the economy next year. Just recently, though, two key pieces of economic data were released that provide insight into this issue. Seniors need to pay attention to these two numbers because they could affect their finances in important ways. 

December’s jobs report impacts COLA predictions

The first key number that provides insight into upcoming COLAs is the jobs report released by the Bureau of Labor Statistics on December 16.  This report provides insight into the unemployment rate for November, and the news wasn’t great for workers. The data revealed the unemployment rate was up to 4.6%. While this wasn’t a notable change from September’s number, it is higher than the 4.2% unemployment rate from November of 2024 and is at the highest level in years.

The report not only showed high unemployment rates, but it also revealed that hiring is sluggish. This isn’t a huge surprise, as there are a number of headwinds making companies reluctant to hire, including continued uncertainty about tariffs, low consumer confidence levels, and persistently high inflation rates. With corporations concerned that consumer spending may be down as prices rise, companies are not eager to hire.

Of course, retirees don’t need to worry about finding work — and these numbers won’t affect the COLA coming in January. However, the numbers suggest that we may not be looking at a strong economy next year, at least at the start. Higher jobless rates and other economic woes could reduce consumer demand, driving down inflation and resulting in a smaller COLA next time around. 

On the upside, though, if prices do fall because of a troubled economy, the 2.8% raise retirees are on track for in 2026 could stretch further. 

December’s CPI data and the upcoming COLA

CPI data is another important metric retirees need to watch. The government has various consumer price indexes tracking different kinds of inflation, including CPI-W, which is the specific metric used to determine the COLA. When the CPI-W data from the third quarter shows average prices increase, COLAs are set based on the amount that prices rose. 

The Bureau of Labor Statistics released updated CPI data in December, which details the inflation that occurred based on November price changes. The December data showed the Consumer Price Index for All Urban Consumers (CPI-U) is up 2.7% year over year before seasonal adjustments. Core CPI, which excludes food and energy, showed an even lower rate of inflation at 2.6%. 

While these numbers are not determinative of the next COLA, as we won’t have the relevant CPI-W data for many months, they do show broader trends that suggest inflation is cooling. If that trend persists, then retirees’ 2.8% raise in 2026 will go a little further than it would if price increases kept happening at a faster pace. Unfortunately, this could also mean a smaller COLA the next time around.

Of course, we will have lots more economic data before the next COLA is announced. Still, retirees should keep an eye on these metrics both because they can affect how far the 2026 raise goes and will help to determine the size of the 2027 COLA when the time comes.