For millions of retired Americans, Social Security is not just an income—it is their financial lifeline. In June, about 53.1 million retired workers received a monthly check, with the average benefit standing at $2,005.
While this amount may seem modest, nearly 80% to 90% of retirees depend heavily on it to manage their daily expenses. According to Gallup surveys conducted over the last 25 years, this reliance has remained a consistent trend.
Every year, retirees eagerly wait for the Social Security Administration (SSA) to announce the cost-of-living adjustment (COLA) in October. The adjustment directly impacts how much money they will receive each month.
Interestingly, the 2026 COLA could create a historic moment not seen in nearly three decades, but even with this increase, many retirees will still find themselves struggling.
Why Social Security’s COLA is Important
The main goal of the cost-of-living adjustment (COLA) is to protect retirees from inflation. As the prices of goods and services increase, Social Security benefits are raised to ensure that retirees don’t lose their purchasing power.
For example, if inflation rises by 2.5%, benefits also go up by the same percentage. This annual “raise” helps seniors maintain their standard of living despite rising costs.
The History of COLA Calculations
Before 1975, there was no set formula for Social Security increases. Congress had to pass special laws to adjust benefits, and only 11 such increases were made over 35 years. The biggest jump happened in 1950, when benefits rose by 77%!
Since 1975, adjustments have been tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures changes in prices across more than 200 categories.
By focusing on CPI-W readings from July, August, and September, the SSA calculates the COLA for the following year. If inflation is higher than the previous year, retirees receive an increase in their checks.
How COLA is Calculated
The calculation process is straightforward:
The SSA compares the average CPI-W readings of July–September to the same period in the previous year.
The percentage increase is the COLA, rounded to the nearest tenth.
This ensures that benefit increases reflect real-world inflation. However, the effectiveness of this system depends heavily on economic conditions and government policy.
The 2026 COLA: A Historic Streak
In recent years, COLAs have been higher than usual due to inflation and pandemic-related policies. Here’s a quick look:
| Year | COLA Increase |
|---|---|
| 2022 | 5.9% |
| 2023 | 8.7% |
| 2024 | 3.2% |
| 2025 | 2.5% |
The 8.7% jump in 2023 was the largest in 41 years. If the 2026 COLA stays above 2.5%, it will mark the first time since 1997 that retirees have received at least five consecutive years of such increases.
Current estimates by The Senior Citizens League (TSCL) and analyst Mary Johnson both point to a 2.7% COLA for 2026. That would mean an average monthly increase of around $54 for retired workers.
Why Retirees Still Lose Despite Higher COLAs
Even with these increases, retirees face a “no-win” situation. According to TSCL, the purchasing power of Social Security income dropped by 20% between 2010 and 2024. What $100 could buy in 2010 now only buys about $80 worth of goods and services.
One reason is that COLA is tied to the spending patterns of urban workers, not seniors. Retirees spend a large share of their income on healthcare and housing—two areas where prices are rising much faster than the COLA adjustments.
On top of that, Medicare Part B premiums, which cover outpatient services, continue to eat into Social Security checks, leaving retirees with even less disposable income.
Rising Costs and The Bigger Picture
The unfortunate truth is that Social Security’s COLA, while helpful, often fails to keep up with the real expenses retirees face. Housing, healthcare, and basic needs continue to rise faster than benefits. This mismatch means that even though retirees see their monthly checks grow, their ability to afford daily essentials weakens year by year.
Social Security is the backbone of retirement income for millions of Americans, but inflation, healthcare costs, and rising living expenses continue to reduce its true value. While the 2026 COLA may provide a historic streak of above-average increases, retirees are still battling shrinking purchasing power.
Unless the formula for COLA better reflects senior spending habits, Social Security checks will never fully match the rising cost of living, leaving retirees financially vulnerable despite annual adjustments.
