There was a time decades ago when Social Security benefits were not automatically eligible for a cost-of-living adjustment, or COLA, each year. Rather, lawmakers had to vote in a raise for seniors to see their benefits increase.
In 1975, things changed. And from that point onward, Social Security benefits have been eligible to get a COLA each year automatically.
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When there's a rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from one year to the next, benefits get a boost. When the CPI-W doesn't rise or decreases, Social Security benefits remain flat.
It's a good thing that lawmakers made COLAs automatic, because without them, Social Security recipients would be virtually guaranteed to lose buying power over time due to inflation. But as a result, many seniors have become dependent on Social Security COLAs to keep up with their living costs. And many are hoping for a larger COLA in 2026 than what they received in 2025.
So far, it's looking like they might get their way. But it's important to recognize that a larger Social Security COLA could come at a major cost.
What Social Security's 2025 COLA looks like so far
Because Social Security COLAs are based on third-quarter CPI-W data, it's too soon to know exactly what next year's raise looks like. But based on inflation data that's come in so far, the Senior Citizens League, an advocacy group, is projecting that 2026's COLA will amount to 2.7%.
That's an improvement over 2025's COLA of 2.5%. And if inflation continues to trend upward in the next month or two, seniors could be in for an even larger Social Security raise in the new year.
A larger COLA isn't all that great
Most seniors would prefer a larger Social Security COLA to a smaller one. But it's important to recognize that a more generous COLA is not necessarily positive news.
The only thing a larger COLA means is that living costs are rising. And so what seniors gain in the form of more money in their monthly Social Security checks, they lose in the form of higher costs at the pump, supermarket, and more.
In fact, based on how inflation has trended recently, it's clear that Social Security's 2025 COLA is already losing steam. Broad inflation has outpaced that 2.5% raise in recent months, which is no doubt causing some seniors to fall behind on their bills (or at least struggle to keep up with them).
Understand how Social Security COLAs work
While it's easy to see why seniors may be inclined to bank on Social Security COLAs from year to year, it's important to have an alternate plan to cope with rising costs. And for some, that might have to mean rejoining the workforce in some shape or form.
Many seniors already live a pretty minimal lifestyle, and therefore only have so many expenses they can cut back on when costs rise. And while relocating to a cheaper ZIP code is one potential way to reduce spending, it's not necessarily feasible for everyone, as it could mean leaving family and a support network behind.
Meanwhile, workers today should understand the limits of Social Security COLAs and do their best to save well for retirement to become less reliant on them. Even a modest nest egg could come to the rescue when living costs rise and Social Security inevitably fails to keep pace.
