Brace yourself, retirees—Social Security’s 2026 cost-of-living adjustment (COLA) might not keep pace with your real expenses.
According to The Motley Fool, forecasts now peg the 2026 COLA between 2.4% and 2.7%, translating to an average monthly increase of $48 to $54 for retirees, though experts warn this may not adequately address inflation pressures faced by seniors.
Social Security beneficiaries depend on these annual adjustments to combat rising prices across the economy.
Estimates for the 2026 COLA have been revised multiple times this year. In January 2025, the Congressional Budget Office projected a 2.4% increase, while the Social Security Board of Trustees estimated a 2.7% rise in their June 2025 annual report. The Senior Citizens League, a nonprofit advocacy group, adjusted its forecast upward to 2.6% as of July 2025, citing higher-than-expected inflation.
The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks price changes based on the spending habits of urban households earning wages.
This involves comparing the CPI-W from the third quarter of the current year (July to September) to the same period of the prior year, with the resulting percentage increase setting the next year’s COLA. For instance, a 2.5% CPI-W rise in the third quarter of 2024 led to a 2.5% COLA for 2025.
The Bureau of Labor Statistics will release the September CPI-W data on October 15, 2025, at 8:30 a.m. ET. On the same day, the Social Security Administration will confirm the official 2026 COLA, finalizing the adjustment for beneficiaries. This date is critical for retirees planning their budgets for the upcoming year.
As of June 2025, the average retired worker benefit stands at $2,005 per month, which could rise to $2,053 with a 2.4% COLA or $2,059 with a 2.7% COLA in 2026. Other groups see similar modest gains: spouses of retirees currently average $953 monthly, increasing to $976 or $979; survivors average $1,571, rising to $1,609 or $1,613; and disabled workers average $1,582, adjusting to $1,620 or $1,625.
While these boosts offer some relief, the question remains whether they truly match the cost pressures seniors face.
The CPI-W, used for COLA calculations, reflects the spending patterns of urban wage earners, not retirees who spend more on housing and medical care. Inflation data through June 2025 shows housing costs up 3.9% and medical care up 2.8%, outpacing the overall CPI-W inflation of 2.4%.
This mismatch means the 2026 COLA—potentially between 2.4% and 2.7%—could underestimate the real financial strain on beneficiaries, echoing concerns from the past two years when retirees felt adjustments fell short.
Research from The Motley Fool reveals that most retired workers found the last two COLAs insufficient to maintain their purchasing power. If current inflation trends hold through the third quarter of 2025, the 2026 adjustment might again leave benefits lagging behind actual costs. This persistent gap highlights a flaw in how inflation is measured for Social Security adjustments.
For center-right readers wary of government inefficiencies, this raises a red flag about bureaucratic metrics like CPI-W failing to reflect real-world economics. Retirees are squeezed by higher housing and medical inflation, yet the system clings to a formula misaligned with their needs. Could a market-driven or senior-specific index better serve beneficiaries?
While we await the official COLA on October 15, 2025, retirees should brace for a modest bump that may not cover rising costs. Consider tightening budgets now—focus on frugality in discretionary spending to offset potential shortfalls. For those still building wealth, this is a reminder to diversify income streams through investments like dividend stocks or real estate to reduce reliance on Social Security.