You're not the only one who was disappointed when the Social Security Administration announced a 2.8% cost-of-living adjustment (COLA) for 2026 last month. While it's technically a bit above average compared to the last couple of decades, that $56 average monthly increase won't change your life. It might not even cover the inflation you've experienced over the last several months.
The Motley Fool recently surveyed seniors about the COLA and nearly a third of them said they ideally want a COLA of 10% or more to keep up with their current cost of living. While that might sound far-fetched, there are actually a couple of ways it could happen -- but you might not like them.
Image source: Getty Images.
1. High inflation
Social Security COLAs are based on the changes in average third-quarter inflation data from one year to the next. The Social Security Administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate this. Essentially, it averages the July, August, and September numbers from the current year and the previous year and then looks at the percentage increase. That number becomes the COLA.
A 10% COLA might sound far-fetched, but it's happened before. In 1981 and 1982, seniors saw boosts of 14.3% and 11.2%, respectively. And in 2023, Social Security beneficiaries came close once again with an 8.7% boost.
So reaching a 10% COLA with the current COLA calculation isn't impossible. It's just undesirable. A COLA that large would only occur alongside extremely high inflation that would drive up the cost of virtually everything. Any extra money you received would go toward paying for these extra costs. And, as we've already talked about, COLAs don't do the best job of keeping up with inflation.
The Senior Citizens League (TSCL) reported in 2024 that Social Security had lost 20% of its buying power since 2010 in spite of COLAs. This trend will likely continue if the Social Security COLA calculation remains the same.
2. A change to the Social Security COLA calculation
The other way Social Security beneficiaries could see a 10% COLA would be if the government changed the way it calculates COLAs. One popular proposal is to use the Consumer Price Index for the Elderly (CPI-E) to calculate COLAs instead of the CPI-W, which doesn't actually include retirees in its dataset.
Research shows that this change would increase COLAs in most years, but even then, the difference is small. You'd still need high inflation to come close to a 10% increase.
It's also possible that the government could issue a larger, one-time COLA increase. However, Congress would need to approve a move like this and so far, proposals about changing the COLA formula haven't gained any traction.
Part of this may be because higher COLAs would increase the program's expenses more quickly. That's a problem because Social Security's trust funds are already dangerously close to depletion. The latest Trustees Report estimated that Social Security would be unable to pay out its full benefits beginning in 2033.
It's likely Congress will intervene before this happens to ensure Social Security's sustainability for future generations. But we don't know what the reforms will look like yet. It's possible workers will have to pay more in Social Security payroll taxes. Some people may also get smaller lifetime benefits if the full retirement age (FRA) increases. Because so much remains up in the air, it's difficult to say what COLAs might look like in the future or whether they'll ever get a double-digit increase.
For now, it falls to Social Security beneficiaries to come up with ways to supplement their checks on their own. This could mean relying more on savings from your retirement accounts or picking up a part-time job. Now's a good time to start planning your retirement income strategy for 2026 so you know exactly what to do when January arrives.
