Social Security's 2026 COLA Will Probably Fail Retirees. Here's Why

When the Social Security Administration announced last year that benefits would be getting a 2.8% cost-of-living adjustment, or COLA, in 2026, many recipients were happy. After all, last year’s COLA came in at only 2.5%. In comparison, a 2.8% bump may have seemed generous.

But not everyone was happy with that raise. A Motley Fool survey found that 54% of retirees felt a 2.8% raise for 2026 was insufficient. And 68% said that 2.8% COLA would not do much to help them cover essential living expenses.

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Now, the good news is that so far, 2026’s Social Security COLA seems to be outpacing inflation. But that doesn’t mean seniors are going to gain or even maintain buying power this year.

There’s a big problem with Social Security COLAs

In January, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.2% on an annual basis. The reason this is important is that the CPI-W is the measure used to calculate Social Security COLAs. Since a 2.2% increase in inflation is smaller than the 2.8% increase Social Security benefits got in January, it’s easy enough to make the argument that so far, this year’s COLA is serving seniors pretty well.

But there’s a flaw in that line of thinking.

Just because this year’s COLA seems to be outpacing inflation so far doesn’t mean it will continue to do so for the rest of the year. And also, CPI-W levels aren’t the only metric to look at.

Social Security recipients have long been losing buying power because they tend to spend a lot of their income on healthcare expenses, which have outpaced broad inflation in recent years. Since that’s not well reflected in Social Security’s COLA formula, recipients tend to lose out even in years when their raises are large.

In fact, let’s look at this year’s Medicare Part B increase. The standard monthly premium rose by 9.7% this year compared to last year, which well outpaces Social Security’s 2.8% COLA.

Not surprisingly, the Senior Citizens League, an advocacy group, just found that almost 58% of seniors have skipped at least one healthcare product or service to reduce their costs over the past 12 months. The group also found that between 2010 and 2024, seniors on Social Security lost 20% of their buying power.

Don’t think too positively

While it may be encouraging to see Social Security’s COLA outpace inflation early on in the year, things could easily change for the worse. And for many seniors, healthcare costs could still render that COLA pretty useless.

If you get most of your retirement income from Social Security and you’re struggling to keep up with your expenses, the solution isn’t to hope that this year’s COLA continues to beat inflation. A better bet is to reexamine your budget, find ways to cut costs, and consider part-time work to give yourself a raise that might actually do something for you.