As higher prices continue to eat away at retirees' budgets, many people are eagerly awaiting the announcement of the 2026 cost-of-living adjustment (COLA).
The Social Security Administration is expected to make the announcement around Oct. 24, as that's when the Bureau of Labor Statistics will release September's Consumer Price Index report. This particular COLA could make history, but retirees should still brace themselves for bad news.
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Why this COLA could be historic
Although we'll have to wait until Oct. 24 to know the official COLA, experts at nonpartisan advocacy group The Senior Citizens League have estimated that next year's adjustment will be 2.7% -- assuming September's inflation data is consistent with expectations. If that forecast ends up being correct, it could make history.
COLAs have been consistently small over the last decade, averaging just 2.3% since 2009. A 2.7% raise next year would be the fifth straight year of higher-than-average COLAs. It will also be the first time in three decades since we saw a raise of more than 2.5% for five consecutive years.
Retirees have also been receiving record-high payments. The average retired worker's benefit amount topped $2,000 per month earlier this year for the first time in history, and the maximum benefit also reached a record high of $5,108 per month for retirees who file at age 70.
With COLAs surging and average benefit amounts consistently reaching new highs, that may seem like great news for retirees. But there's a sneaky downside to these higher payments.
Social Security is failing retirees
COLAs were designed to help benefits keep up with rising inflation, but they're not consistently doing that. A 2024 report from The Senior Citizens League found that since 2010, benefits have lost around 20% of their purchasing power.
Part of this is due to how the COLA is calculated. It's based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks workers' spending habits.
However, retirees often have very different spending patterns than workers. Many older adults dedicate a higher portion of their budgets toward costs like housing and healthcare, which have been more affected by inflation than some other expenses. This means that retirees are often hit disproportionately hard by rising costs, yet that's not reflected in the COLA calculations.
With benefits consistently losing buying power and costs continuing to rise, it could become even more difficult for retirees to survive on Social Security. Considering that benefits are responsible for keeping around 16 million adults age 65 and older out of poverty, according to a study from the Center on Budget and Policy Priorities, countless retirees could be at risk going forward.
Social Security's future may be out of your control, but it can still be helpful to understand the program's struggles and limits. By doing your best to reduce your dependence on your benefits, you can better protect your financial future.
