If you’ve been eagerly waiting for the 2026 Cost-of-Living Adjustment (COLA), there’s some disappointing news. The expected 2.6% increase will not be enough to protect retirees from the ongoing rise in living costs.
This small boost is nowhere near enough to keep up with inflation, and it leaves many retirees struggling to maintain their purchasing power.
The situation is so dire that, experts say, retirees’ purchasing power has dropped by over 20% since 2010. The core issue lies with the way the COLA is calculated, using an index (CPI-W) designed for active workers, not retirees. This leads to an increase that doesn’t reflect the actual needs of those who are no longer working.
What is COLA and How is it Calculated?
COLA stands for Cost-of-Living Adjustment, which is meant to protect Social Security payments from inflation. The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation that tracks the costs of goods and services for working adults.
While it works to maintain purchasing power for active workers, it falls short when applied to retirees. This is because retirees spend a larger portion of their income on specific areas like housing and healthcare—both of which have seen significant price increases. Unfortunately, the CPI-W doesn’t accurately reflect their needs.
Why the 2026 COLA Won’t Be Enough
For 2026, the projected 2.6% COLA increase might seem like good news, but it’s hardly enough. The issue is that while the CPI-W has increased by just 2.4% in the first half of 2025, housing costs have gone up by 3.9%, and healthcare costs by 2.8%.
These are two of the largest spending categories for retirees, yet the COLA doesn’t account for the larger price hikes in these areas.
This mismatch has caused a 20% loss in retirees’ purchasing power since 2010, according to The Senior Citizens League. While Social Security payments have increased nominally, the real value of those payments has decreased as prices for essential goods and services continue to rise faster than COLA adjustments.
The Political Factor: How Politics Is Affecting Retiree Well-being
The situation is worsened by political factors, particularly the hiring freeze in federal agencies during the Trump administration, which has impacted the accuracy of the data used to calculate inflation.
With fewer people collecting data, experts warn that the CPI-W might not be fully reflective of the real cost of living, further affecting retirees’ income.
Retirees’ Confidence Is at an All-Time Low
Retirees are feeling the pressure. A study by the Employee Benefit Research Institute found that less than a third of retirees feel confident about their financial future.
With COLA adjustments that don’t truly reflect their spending needs, many retirees are struggling to make ends meet and are unsure if they’ll be able to live comfortably in the years ahead.
What Can Be Done to Fix the Issue?
Some lawmakers have proposed using an alternative to the CPI-W—a new index that takes into account how retirees actually spend their money. This would be a reasonable first step to ensuring that COLA adjustments better reflect the reality of life for retirees.
The Problem with “Patchwork Solutions”
Unless there is real reform to how COLA is calculated, the annual adjustments will continue to be nothing more than small, symbolic increases that don’t address the bigger issue. Many retirees will have to rely on aid, subsidies, or their own savings to get by, and the outdated system will continue to fail them.
The 2026 COLA Won’t Fix Anything
While the 2026 COLA might be reported as good news, it’s actually a tiny and insufficient fix for retirees. Unless the way the COLA is calculated is reformed to account for retirees’ actual expenses, their purchasing power will continue to shrink, and the dream of a comfortable, dignified retirement will slip further away.
