If you're struggling to stretch your Social Security checks far enough already, a large Social Security cost-of-living adjustment (COLA) probably sounds like good news to you. A bigger COLA means a bigger increase to your monthly benefit for the next year.
COLAs are so important to seniors that organizations like The Senior Citizens League (TSCL), a nonpartisan senior group, track them year-round, updating their estimates monthly until the official COLA announcement in October.
Back in January, it was predicting a lackluster 2.1% COLA for 2026, which would have been the smallest COLA since 2021. Slowly but surely, that prediction has crept up, and it's now very likely that seniors will see an average to above-average bump next year. But while that sounds good on paper, there's a hidden cost you need to understand when building your budget for 2026.
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How Social Security COLAs work
Social Security COLAs are designed to help your benefits keep pace with inflation. The Social Security Administration measures this by comparing the average third-quarter inflation data from the current year and the previous year, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This tracks the cost of a basket of common goods and services over time. The difference between the two averages becomes the COLA.
For example, the 2024 third-quarter average was 2.5% higher than the 2023 third-quarter average, giving us a 2.5% COLA for 2025. Since the third quarter of the year doesn't end until Sept. 30, we have to wait until the middle of October for all the necessary data to calculate the 2026 COLA. But that hasn't stopped predictions from circulating about what it could look like.
COLAs and inflation go hand in hand
The latest 2026 COLA prediction estimates a 2.6% increase for 2026. This would put it right in line with the average COLA over the last 25 years. While that difference means more money for seniors, it also indicates higher inflation than what earlier projections expected.
For most, COLAs typically don't translate into a higher standard of living. Instead, the extra money goes toward higher expenses on everyday items. And it's not always enough to keep up.
Though they're supposed to help your benefits maintain their buying power over time, data shows COLAs don't actually do that. A TSCL report reveals that Social Security benefits have lost 20% of their buying power since 2010 despite COLAs, and this trend seems likely to continue for the foreseeable future.
Some seniors and politicians have argued that the government should calculate COLAs based on the Consumer Price Index for the Elderly (CPI-E) rather than the CPI-W, which excludes most retirees. This change would result in larger COLAs in most years, but so far, Congress hasn't budged on this issue.
For now, it's up to seniors to figure out how to make ends meet on their own. This may not be too difficult if you have plenty of personal savings. If not, you may have to look into other government benefits or a part-time job to make ends meet.
Once the Social Security Administration announces the official COLA, you'll be able to figure out how much it'll add to your checks next year. Then, you can start to build your budget for 2026.
