Social Security’s Cost-of-Living Adjustment (COLA) serves an important role for retirees, helping to preserve the purchasing power of their benefits as inflation drives up the cost of goods and services.
In a typical year, if inflation increases, Social Security benefits are adjusted accordingly to help retirees maintain their standard of living. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) measures inflation, determining whether and by how much the COLA will rise.
Before 1975, COLAs were infrequent, but since then, they have been calculated annually, and every year, the COLA announcement is highly anticipated by the 53 million retired workers relying on Social Security.
The 2026 COLA: Likely to Make History
The 2026 COLA is expected to be significant, continuing a trend of higher-than-usual adjustments in recent years. Since the inflation surge caused by the COVID-19 pandemic, Social Security beneficiaries have seen larger-than-normal COLA increases:
5.9% in 2022
8.7% in 2023 (the highest increase in 41 years)
3.2% in 2024
2.5% in 2025
For 2026, estimates predict a 2.7% COLA, based on continued inflationary pressures. This would be the fifth consecutive above-average adjustment, marking a historic streak. If the 2.7% estimate holds, it would result in an average increase of $54 per month for retired workers.
The Dilemma for Retirees: A “No-Win” Scenario
While the COLA increase seems like good news, it doesn’t necessarily translate into financial relief for retirees. For the past few years, inflation has far outpaced the COLA, and many retirees are facing stagnant or declining purchasing power despite the raises.
An analysis by The Senior Citizens League (TSCL) found that the purchasing power of Social Security has dropped by 20% between 2010 and 2024. This means that $100 in Social Security income in 2010 could only buy $80 worth of goods in 2024.
One of the core issues is that the CPI-W used to calculate COLA increases is based on the spending patterns of urban wage earners and clerical workers, not retirees.
Many retirees face higher costs in healthcare and housing, which are not fully reflected in the CPI-W. For instance, the cost of shelter and medical care services, which are significant expenses for retirees, has outpaced the COLA in recent years.
The Medicare Part B Premium Challenge
In 2026, Medicare Part B premiums are expected to rise by 11.5%, reaching $206.20 per month. Since Medicare Part B premiums are typically deducted directly from Social Security benefits, this increase would likely consume a significant portion—if not all—of the 2.7% COLA increase.
As a result, many retirees may not see the benefit of the COLA adjustment in their monthly checks after accounting for this higher premium.
A Historic COLA with Limited Benefits
While the 2026 COLA is likely to make history with its fifth consecutive above-average increase, the reality for most retirees is that it may not provide much tangible relief.
Rising costs in essential areas like healthcare and housing, combined with the increased Medicare premiums, mean that the COLA will likely be swallowed up, leaving many retirees still struggling with decreased purchasing power.
This no-win scenario highlights the challenges retirees face despite seemingly positive news about Social Security benefits.
