Social Security 2026: What is the latest COLA update? Here’s what retirees need to know
Retired workers have not received a smaller pay increase since 2021. This news comes as economic uncertainty and tariff wars are on the minds of many Americans.
Social Security 2026 update
The Senior Citizens League, a nonpartisan advocacy group, recently revised its 2026 COLA forecast down to 2.2 per cent, raising concerns for thousands of retired people.
The COLAs in 2024 and 2025 failed to keep up with rising prices, as per a Motley Fool report which surveyed retired workers.
Social Security is generally the largest source of income in retirement, but many seniors think that benefits have fallen behind inflation. This has made them advocate for a larger increase in COLA. But, this may not be achievable. The latest projection from The Senior Citizens League (TSCL) suggests that Social Security’s COLA will shrink once again in 2025. It looks like inflation is set to impact retirees even more in the long run.
Projected COLA for 2026:
The COLA is estimated at 2.1 per cent, with some forecasts going as low as 0.06 per cent. COLA for 2025 is expected to be 2.5 per cent (slight decline in inflation). The official announcement on the matter is expected in October.A proposed Senior Citizens Tax Elimination Act could remove Social Security benefit taxes, saving seniors $3,000 annually
How is COLA calculated?
Retired workers on Social Security receive annual COLAs to keep benefits in line with inflation. COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers or CPI-W. It tracks price changes based on hourly workers’ spending.
The COLA is the percentage increase in the CPI-W from the third quarter of the previous year to the current year. For example, a 2.5 per cent CPI-W increase in 2024 led to a 2.5 per cent COLA in 2025.
However, CPI-W doesn’t accurately reflect retirees’ expenses, as they spend more on housing and healthcare and less on education and transport. This mismatch means COLAs often don’t fully cover retirees’ rising costs.
What does a lower COLA mean?
Retirees face challenges when COLA is reduced. The effects of lower COLA include:
– Impact on purchasing power.
– Increase in health care costs.
– More reliance on savings.
– Rise in housing and utility expenses.
FAQs:
What are cost-of-living adjustments (COLAs)?
Cost-of-living adjustments (COLA) are increases in Social Security benefits. These are intended to counteract inflation.
What is Social Security?
Social Security is a federal program in the US that provides retirement benefits and disability income to qualified individuals and their families.
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