Social Security COLA Increase Prediction Sparks Warning From Senior Group
A senior group is warning once again that Social Security’s cost-of-living adjustment won’t be enough for the average senior citizen next year.
The Senior Citizens League is predicting a 2.7 percent COLA for 2026. While this would be a slight increase from the 2.5 percent boost seniors got this year, the organization said seniors are facing inflation on everyday items that far surpass the increase.
Why It Matters
Around 70 million Americans receive Social Security payments each month, and seniors make up a large share of them.
The COLA is used to adjust their benefits based on the inflation Americans are experiencing, but there has long been criticism that the way the government calculates the adjustment doesn’t reflect the full inflationary pressures that seniors experience.
What To Know
The Senior Citizens League warned that an upcoming 2.7 percent COLA will not be enough to support seniors and the economic pressures they face.
“Our team predicts a 2.7 percent COLA, a slight increase from last year’s 2.5 percent. But even with that bump, it still won’t be enough to cover the rising costs seniors face,” the organization said. “Everyday essentials like housing, healthcare, and groceries continue to climb faster than the COLA can keep up with.”
According to TSCL, the problem isn’t necessarily in the percentage alone, but rather in the entire formula used to calculate the benefit adjustment.
“The government still uses the Consumer Price Index for Urban Wage Earners (CPI-W) to calculate the COLA, even though it doesn’t reflect how seniors actually spend their money,” the Senior Citizens League wrote.
“TSCL is calling on Congress to adopt the Consumer Price Index for the Elderly (CPI-E) — a fairer measure that would protect retirees’ buying power for good.”
Many financial experts agree that COLA isn’t keeping pace with real inflation, including 9i Capital CEO Kevin Thompson.
“Case in point: a $30,000 annual Social Security benefit only increases by about $67.50 per month. When you factor in the $21.50 increase in the Medicare Part B premium, there’s not much left over,” Thompson, who hosts the 9innings podcast, told Newsweek.
“CPI-E would be a far better measure. Retirees aren’t in the workforce, yet the current formula, CPI-W, is based on urban workers’ spending patterns. The things that drive costs for workers aren’t the same as those affecting retirees. CPI-E would give more weight to health care and other essentials that impact seniors directly.”
What People Are Saying
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “The problem isn’t the percentage itself…It’s that we’re calculating benefits based on how younger workers spend money, not how retirees actually live. The CPI-W tracks spending patterns of wage earners buying work clothes and commuting to jobs. Expenses most 75-year-olds don’t have.
“Would CPI-E be better? Marginally, but it’s not a silver bullet. Over the past 25 years, CPI-E has outperformed CPI-W 69 percent of the time, averaging just 0.1 percentage points higher annually. That compounds to roughly $5,000 in lost purchasing power for someone who retired in 1999. It’s real money. Seniors spend nearly double on health care compared to the general population, and medical costs have risen 99.6 percent over the past 20 years while overall prices increased just 49 percent.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “For years, advocates have argued COLA for Social Security is using a consumer price index that isn’t sufficient to capture the actual inflationary pressures many seniors encounter. CPI-E is viewed by some as a more accurate read of the pricing fluctuations seniors nationwide are seeing, as opposed to CPI-W, which is currently used. The difference from a switch would be substantial, totaling to thousands of additional dollars in payments to recipients over years of receiving benefits. However, the change—which has been proposed multiple times in the past—has never gained enough momentum to become reality, and it’s unlikely to change any time soon.”
9i Capital CEO Kevin Thompson told Newsweek: “It won’t be a material impact one way or the other. For some, the impact will be negative due to the fact it may push them into higher provisional income brackets, forcing a higher percentage of their social security to become taxed. Remember, those social security tiers are using provisional income, and they are not tied to inflation, thus forcing more taxation of your benefits.”
What Happens Next
Ryan said the insufficient COLA makes a wide impact, as 39 percent of seniors depend on Social Security for 100 percent of their income, and 7.3 million survive on less than $1,000 a month.
“When the average one-bedroom apartment rents for $1,550, neither COLA formula can bridge that gap,” Ryan said. “The real crisis isn’t the calculation method; it’s that we’re expecting a cost-of-living adjustment to compensate for insufficient retirement savings and a healthcare system that devours fixed incomes.”