For retirees who get most of their income from Social Security, the past couple of years have been tough. Although inflation calmed down compared to a few years prior, living costs have remained stubbornly elevated. And recent Social Security cost-of-living adjustments, or COLAs, have done a poor job of helping retirees keep up with their rising costs.
Social Security recipients were especially disappointed in their 2025 COLA, which came in at only 2.5%. And many seniors are no doubt hoping for a more generous raise in 2026.
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In that regard, there's some potentially good news on the COLA front. Or is there?
Social Security's 2026 COLA projection just increased
There's a reason the Social Security Administration (SSA) does not make a COLA announcement until October each year. Its COLAs are based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). And so the SSA has to wait on CPI-W data from September to run its numbers and figure out what raise seniors will get.
Still, there are clues along the way. And based on the most recent data, the nonpartisan Senior Citizens League, an advocacy group, projects that 2026's COLA will come in at 2.7%.
That's an improvement over 2025. And it's also an improvement over the group's 2.6% COLA estimate from last month.
But while a 2.7% Social Security COLA might seem like great news compared to earlier estimates, there's a major downside to seniors getting a larger raise. And it's important to understand what a more generous COLA actually means.
Why seniors may not want such a large Social Security COLA
Because Social Security COLAs are tied directly to inflation, the more living costs increase, the more generous they tend to be. But if next year's COLA comes in at 2.7% or higher, it's an indication that inflation is ticking upward.
Many financial experts have been sounding alarms about the impact of tariffs on living costs for months. With those policies coming to a head, we could see many costs start to rise. That's bad news not just for Social Security recipients, but also for consumers across the board.
Another thing to realize is that if living costs rise and Social Security benefits rise with them, the best-case scenario is that seniors get to maintain their buying power -- not get ahead. But it's important to note that historically, Social Security COLAs have done a poor job of keeping up with inflation, even when they've been more generous.
All of this underscores the importance of having income outside of Social Security in retirement. For current seniors, it may be too late to build notable savings. But it's definitely not too late to make lifestyle changes or consider part-time work.
Current workers, meanwhile, should recognize that Social Security COLAs may not do much for their finances and prepare accordingly. That means saving aggressively in an IRA or 401(k) plan so there's money to fall back on outside of Social Security alone.
