By now, all Social Security recipients should have received their first checks for 2025. Thanks to a 2.5% cost-of-living adjustment (COLA), the average monthly benefit has increased to $1,976—about $49 more than in December 2024.
While this increase provides some relief, it is not enough to keep up with rising expenses. According to The Senior Citizens League (TSCL), Social Security’s purchasing power has dropped by 20% since 2010. With inflation continuing to affect essential costs like housing, food, and healthcare, many retirees are struggling to make ends meet.
As seniors adjust to their new 2025 Social Security payments, many are already looking ahead to the 2026 COLA. However, early predictions suggest that next year’s adjustment may be even lower.
What Determines the COLA?
Every year, the Social Security Administration (SSA) calculates the COLA based on third-quarter inflation data (July, August, and September) from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
This index measures changes in the prices of goods and services, but many retirees argue it does not reflect their actual expenses. Healthcare, for example, is a major cost for seniors, yet CPI-W does not prioritize healthcare spending. A better alternative, the Consumer Price Index for the Elderly (CPI-E), has been proposed, but Social Security still relies on CPI-W to determine yearly COLAs.
2026 COLA Likely to Be the Smallest Since 2021
Recent economic data suggests that inflation is slowing. While this is good news for consumers in general, it also means that Social Security’s COLA will be smaller because it is tied to inflation levels.
Early estimates from The Senior Citizens League (TSCL) predict that the 2026 COLA could be just 2.1%. If this estimate is correct, the average $1,976 monthly benefit would increase to only $2,017—an increase of just $41 per month or $492 per year.
This would be the lowest Social Security COLA since 2021, when the adjustment was 1.3%.
What This Means for Retirees
For many seniors, a lower COLA means greater financial strain. Since Social Security is the main source of income for millions of retirees, a smaller increase could make it even harder to cover daily expenses.
Some key concerns for retirees include:
- Rising Healthcare Costs: Medical expenses often increase faster than inflation, making it harder for seniors to afford prescriptions and treatments.
- Higher Housing Expenses: Rent, property taxes, and utilities continue to climb, putting extra pressure on those living on fixed incomes.
- Grocery Prices Still High: While inflation may be slowing, the cost of food remains significantly higher than pre-pandemic levels.
Many retirement advocates argue that Social Security benefits should be adjusted using CPI-E, which focuses on senior expenses. However, any policy change would require Congressional approval, meaning a switch to CPI-E is unlikely in the near future.
How Seniors Can Prepare for a Smaller COLA
With 2026’s COLA expected to be low, retirees should consider adjusting their financial strategies to make their benefits last. Here are a few steps seniors can take:
1. Review Your Budget
Take a close look at your spending habits and identify areas where you can cut costs. Reducing non-essential expenses like dining out or entertainment can help you save.
2. Look for Additional Income Sources
If possible, consider part-time work, freelance jobs, or passive income streams. Many retirees have turned hobbies into small businesses or picked up flexible remote jobs.
3. Explore Government Assistance Programs
There are federal and state programs designed to help low-income seniors with housing, food, and healthcare costs. Some useful resources include:
- Supplemental Nutrition Assistance Program (SNAP)
- Medicare Savings Programs
- Low Income Home Energy Assistance Program (LIHEAP)
4. Adjust for Inflation in Your Savings Plan
If you have retirement savings, make sure your investments are keeping up with inflation. Consider talking to a financial advisor to find ways to protect your purchasing power.
5. Stay Informed About Social Security Policy Changes
Keep an eye on potential policy updates and changes to Social Security. If lawmakers push for a shift to CPI-E, retirees could see better COLAs in the future.
When Will the Official 2026 COLA Be Announced?
The Social Security Administration will officially announce the 2026 COLA on October 15, 2025. Until then, seniors should stay updated on inflation trends and financial planning strategies.
Even though this year’s COLA was higher than nothing, early projections suggest that 2026’s increase will be smaller, meaning retirees should plan ahead and explore additional financial options.
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