The average Social Security payout for approximately 52 million retired workers in January 2025 was $1,978.77. Although modest, these payments remain essential for retirees managing daily expenses. With 80% to 90% of retirees relying on Social Security for at least part of their income, the annual cost-of-living adjustment (COLA) is a critical update that affects millions.
Why COLA Matters for Retirees
The cost-of-living adjustment (COLA) helps Social Security benefits keep up with inflation, ensuring retirees maintain their purchasing power. Without regular COLA increases, rising costs for essentials like housing, healthcare, and food could quickly outpace benefits, leaving many seniors vulnerable. Introduced in 1975, COLA is designed to provide annual benefit increases based on inflation data.
Projected COLA Increase for 2026
Economic forecasts suggest retirees should expect a moderate COLA increase in 2026. Current projections include:
| Source | Projected COLA for 2026 |
|---|---|
| The Senior Citizens League | 2.3% |
| Independent Expert Mary Johnson | 2.1% |
Although any increase is helpful, many retirees worry it may not be enough to cover rising living costs.
Historical and Projected COLA Changes:
| Year | COLA Percentage | Average Monthly Benefit | Increase Amount |
|---|---|---|---|
| 2024 | 2.5% | $1,927.00 | +$48.08 |
| 2025 | 2.5% | $1,976.00 | +$49.00 |
| 2026 (Est.) | 2.3% | $2,021.50 (Projected) | +$45.50 |
How Is COLA Calculated?
The Social Security Administration (SSA) calculates COLA using third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This calculation compares average prices from July, August, and September of the current year to the same period in the previous year. If there is a rise in prices, the COLA increases benefits accordingly.
Key Factors Influencing the 2026 COLA
Several factors shape the projected 2026 COLA, including:
- Inflation Trends: A gradual decline in inflation rates affects the estimated COLA increase.
- Consumer Prices: Rising costs for essential goods and services, especially healthcare and housing, remain a major concern.
- Legislative Actions: Proposed laws, such as eliminating Social Security benefit taxes, may affect the final COLA.
Impact on Retirees’ Purchasing Power
Despite annual COLA adjustments, retirees have experienced a 20% decrease in purchasing power since 2010, according to the Senior Citizens League. Even with the projected 2.3% COLA increase in 2026, many seniors may continue to face financial strain, especially in managing rising healthcare costs.
Legislative Efforts to Support Retirees
Lawmakers are introducing measures to ease the financial burden on retirees. One significant proposal is the Older Americans Financial Elimination Bill, sponsored by Rep. Thomas Massie of Kentucky. This bill seeks to:
- Eliminate federal income taxes on Social Security benefits.
- Save senior households approximately $3,000 annually.
Important Dates for Social Security COLA in 2026
| Event | Date |
|---|---|
| COLA Calculation Period | July–September 2025 |
| Official COLA Announcement | October 2025 |
| Effective Date of New COLA | January 2026 |
FAQs
What is the projected Social Security COLA for 2026?
Experts predict a 2.3% increase in Social Security benefits for 2026.
How does the Social Security Administration calculate COLA?
COLA is calculated using third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
When will the 2026 COLA be announced?
The official COLA announcement will be made in October 2025.
How does COLA affect my Social Security payment?
COLA increases your monthly benefit to offset rising living costs due to inflation.
What legislative changes could impact Social Security benefits?
Proposed bills, like the Older Americans Financial Elimination Bill, aim to remove federal taxes on Social Security benefits, potentially increasing retirees’ take-home income.