Approaching Retirement Years, Social Security's projected 2026 Cost-of-Living Adjustment threats to undermine financial security for retirees
The upcoming 2026 cost-of-living adjustment (COLA) for Social Security benefits is shaping up to be a challenging scenario for retirees. With inflation rates on the rise, retirees face the daunting task of dealing with higher prices before receiving any extra money to help cover their expenses.
The Social Security Administration calculates the COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index, however, has been criticized for its focus on working Americans rather than retirees, who often have different spending patterns.
The latest projected Social Security COLA by The Senior Citizens League (TSCL) stands at 2.5%. This projection, based on CPI-W inflation data through July 2025, represents a slight increase from their previous estimate of 2.6% and the 2.5% COLA in 2025.
However, the accuracy of the data used to calculate the CPI-W this year could be questionable due to a hiring freeze at the U.S. Bureau of Labor Statistics (BLS). This uncertainty could potentially lead to a lower-than-actual inflation COLA, potentially costing seniors thousands of dollars over the course of their retirement.
Economists expect accelerating inflation in the second half of 2025. This rising trend, coupled with the potential inaccuracies in the CPI-W, could result in retirees facing a no-win scenario. They must pay higher prices now but won't receive a benefits increase until January 2026.
TSCL, an organisation that advocates for seniors, has been critical of the CPI-W, citing it as outdated and riddled with measurement errors. They argue that an alternative metric, the Consumer Price Index for the Elderly (CPI-E), would better reflect the impact of inflation on older Americans.
The use of the suspect data in the CPI-W for the 2026 Social Security COLA calculation could perpetuate a cycle of retirees receiving a smaller benefit increase than they probably should get. This disconnect, as highlighted by a 2024 study by TSCL, has caused Social Security recipients to lose roughly 20% of their buying power since 2010.
The Trump administration's tariffs could also contribute to rising inflation, further complicating the situation for retirees.
As the September inflation data from the BLS becomes available, the Social Security Administration will finalize the calculation of the next year's COLA. Until then, retirees can only hope for a more accurate reflection of their inflationary pressures in the CPI-W.
