Social Security's 2026 Cost-of-Living Adjustment May Surprise Retirees

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Maurie Backman, The Motley Fool

Sat, Mar 22, 2025, 3:49 AM 4 min read

Many older Americans contiguous would not beryllium capable to get by without Social Security. The Federal Reserve puts median status savings among 65- to 74-year-olds astatine conscionable $200,000 arsenic of 2022.

That's not a batch of wealth to dispersed retired implicit what could beryllium 20 years of status oregon more. So naturally, radical without overmuch savings commonly extremity up falling backmost connected Social Security to screen the bulk of their bills.

But seniors successful that vessel whitethorn beryllium having a pugnacious clip keeping up this year. Inflation has not cooled overmuch successful 2025. If anything, it's accrued somewhat from erstwhile Social Security's 2025 cost-of-living accommodation (COLA) was announced.

Seniors learned backmost successful October that their Social Security benefits would emergence by 2.5% successful 2025. Many weren't blessed with that news, and understandably so, since 2025's COLA marks the smallest summation successful years.

Now, there's an estimation for 2026's Social Security COLA connected the table. And the fig whitethorn travel arsenic a surprise.

The intent of Social Security COLAs is to marque definite that seniors tin support up with their costs arsenic ostentation drives prices upward. COLAs are based connected information from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

When the CPI-W rises from 1 twelvemonth to the next, Social Security benefits increase. But due to the fact that COLAs are based specifically connected third-quarter CPI-W data, it's excessively aboriginal successful the twelvemonth to find adjacent year's Social Security summation with certainty. Any fig that exists close present is simply an estimate.

That said, the latest estimation comes courtesy of the non-partisan Senior Citizens League, which says that adjacent year's COLA could beryllium 2.2%. Given that ostentation is inactive wreaking havoc connected consumers of each ages, that mightiness look similar a amazingly debased number. But the quality is not each bad.

A batch of radical who unrecorded mostly connected Social Security close present are having a hard clip keeping up with their expenses. And it mightiness look similar a stingy 2.2% COLA won't assistance matters successful 2026.

But actually, a 2.2% COLA could extremity up being affirmative quality for 1 cardinal reason. For adjacent year's COLA to beryllium that small, ostentation would request to beryllium modest.

In different words, if ostentation levels proceed to prime up successful 2025, adjacent year's Social Security COLA won't beryllium 2.2% -- it volition beryllium higher. If that archetypal estimation ends up being correct, it volition signify a slowdown successful ostentation -- and alleviation from rising prices. That, frankly, could bash retirees a batch much bully than a much generous COLA.