The 2026 Social Security Cost-of-Living Adjustment (COLA) is shaping up to provide the smallest boost in five years, putting further economic pressure on many retirees. The Senior Citizens League (TSCL) raised its estimate to 2.4% recently, while other experts are expecting a 2.1-2.3% adjustment. While slightly above previous projections, this represents a substantial decrease from 2023’s 8.7% or 2022’s 5.9%, and is more in line with 2025’s 2.5% COLA. It would be the lowest increase since 2021’s 1.3% boost.
For already-hemmed-in retirees facing healthcare expenses eating more than 50% of their budgets, this small increase threatens to further erode purchasing power.
How COLA is calculated
The Social Security Administration calculates yearly adjustments based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) comparing average inflation figures from the third quarter of each year.
Recent CPI-W statistics indicate a 2.4% annual growth rate through April 2025, consistent with Federal Reserve Bank of Philadelphia’s median CPI inflation projection of 2.61% in Q2 2026. Though these numbers indicate stabilizing prices, they conceal a deeper problem: senior-specific expenses often outpace general inflation, especially in healthcare.
Read more about Social Security
- 2026 COLA Calculator – This is how much your Social Security checks will increase based on how much you collect with the inflation adjustment next year
- Goodbye to living well with COLA adjustments in 2026 – Here’s how Social Security payments will affect U.S. Boomers
- A 63-year-old widow sends a desperate message with Social Security payments despite earning $56,000 a year: “It’s become a career”
- Four common mistakes that reduce your Social Security benefits drastically (and how the 2026 COLA adjustment to checks won’t fix it)
- Bad news for Millennials and Generation Z who want to collect Social Security – 2035 is the key date on the horizon for the end of Social Security payments
Why the 2026 increase is so modest
Three key factors help explain the modest 2026 COLA forecast:
- Cooling inflation: Post-pandemic price spikes are behind us, core inflation declining from 9.2% in 2022 to 2.6% in 2025.
- Healthcare cost dynamics: As noted by President Donald Trump when signing his executive order pushing to reduce prescription drug prices, older Americans currently spend 40% more on healthcare than do younger families – a point discussed in our article: Good news for millions of Americans from the ‘big, beautiful bill’?
- CPI-W shortcomings: The index underweights medical care (7.3% weighting) but overweights transportation and apparel – less relevant categories for retirees.
What a 2.4% COLA means for your wallet
For the typical retiree with a $1,980 monthly payment, a 2.4% COLA amounts to just a $47.52 increase. But TSCL’s 2025 survey of 1,920 recipients shows dire scenarios:
- 20% spend more than $1,000/month on healthcare
- 57% live on less than <$2,000/month after deductions
To put that in perspective, a $1,000 increase in Medicare Part B premiums would wipe out 21 months’ worth of COLA gains.
Recent COLA trends in context: From spurts to stagnation
The forecasted 2026 adjustment stands in stark contrast to recent history:
- 2022: 5.9% COLA (COVID-era supply chain pressures)
- 2023: 8.7% (energy prices surges)
- 2025: 2.5% (return to moderate inflation)
While current projections suggest economic stability, they ignore the cumulative 14% erosion in benefits seniors have experienced from 2000 to 2023 due to underperforming COLAs. For further context see: The change in the COLA adjustment for 2026 with the new inflation data – This is how Social Security checks would go up
Policy reforms and long-term issues
The Biden administration 2024 policy move towards CPI-E testing for seniors and President Trump’s drug price order are good starts. Systemic issues remain, however:
- CPI-W continues to calculate benefits, in spite of documented senior spending gaps
- Medicare Part B premiums to increase 6% in 2026, potentially covering 58% of COLA
- Social Security Trust Fund balances to be exhausted by 2033 if Congress does not act
What retirees can do now
While systemic reform may take time, retirees have ways to mitigate impacts through:
- Audit your expenses: Monitoring medical vs. discretionary expenses in order to identify areas for potential saving
- Explore finding earning supplemental income: Consider part-time or gig work suitable for seniors’ skills and availability.
- Advocacy: Support organisation’s such as TSCL, who are pushing for CPI-E adoption and fairer COLA calculations through lobbying.
Unless COLA calculations are fundamentally restructured, even “stable” inflation will continue to chip away at seniors’ financial well-being. The projected 2.4% increase in 2026 may offer a small relief on paper — but in real terms, it’s likely to leave retirees further behind in the cost-of-living race.
Further reading:
Do Medicaid or Medicare cover dental service? Coverage, eligibility and what to know about it depending on your plan
Social Security Medicare Part A premiums for 2025: how much will they be next year and to which users will they go up?
