Social Security benefit update: COLA estimate reveals a new and big concern
Social Security payments are expected to rise by around 2.5% next year, but a new and significant concern is looming for 2026.
The Senior Citizens League predicts the 2026 Cost of Living Adjustment will be 2.5%, up from last month’s 2.4% prediction. TSCL’s model prediction has increased for four consecutive months.
There’s a new issue, however, that’s causing concerns among Social Security advocates.
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A hiring freeze at the Bureau of Labor Statistics is causing problems collecting the Consumer Price Index data that’s used to calculate each year’s adjustment. A recent report indicated cutbacks at the bureau have limited the number of businesses used to measure prices, prompting concerns that estimating methods are less accurate than normal.
Issues with the calculation of CPI make it more likely the COLA won’t match inflation, TSCL warns.
“While streamlining the federal government is a good thing, that shouldn’t involve cutting back on our ability to measure how our economy is changing. Inaccurate or unreliable data in the CPI dramatically increases the likelihood that seniors receive a COLA that’s lower than actual inflation, which can cost seniors thousands of dollars over the course of their retirement,” TSCL Executive Director Shannon Benton said.
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Yearly COLAs, designed to prevent benefits from being eroded by inflation, are determined by data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, which tracks the average price of a basket of goods. The average CPI-W for the third quarter – July, August and September – of the previous year is compared to the same period of the current year with the difference resulting in the official COLA.
High inflation during the pandemic pushed the COLA to 5.9% for 2022 and 8.7% in 2023. 2024’s increase was 3.2% followed by 2.5% for 2025. In the past 20 years, COLAS have ranged from as low as zero in 2010, 2011 and 2016 to the high as 8.7% in 2023.