Social Security is set for a historic cost-of-living adjustment (COLA) — the largest in nearly three decades. Yet, despite the increase, many retirees are unlikely to feel any real financial relief. For more than 85 years, the program has served as a lifeline for older Americans, but with rising inflation and skyrocketing health care costs, October’s COLA announcement carries extra weight for the 53.3 million retired workers who depend on it.
Why COLA Matters
COLA is meant to help retirees keep pace with inflation. When the cost of everyday goods and services rises, Social Security benefits are supposed to rise too. Before 1975, there was no automatic system for these adjustments — between 1940 and 1974, only 11 COLAs were enacted, each through special acts of Congress.
That changed when the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) became the official benchmark for inflation adjustments. Each year, COLAs are calculated using CPI-W data from July through September. If the 2025 Q3 average CPI-W exceeds 2024’s, benefits will rise in January 2026.
Inflation Forecasts
Following the latest inflation report, analysts updated their projections. The Senior Citizens League (TSCL) maintained its 2026 COLA estimate at 2.7%, while Mary Johnson, a veteran Social Security analyst, nudged hers to 2.8%.
If those numbers hold, 2026 would mark the fifth consecutive year with a COLA above 2.5%, following 2022’s 5.9%, 2023’s record 8.7%, 2024’s 3.2%, and 2025’s 2.5%.
Shortfalls
Despite the projected increase, many retirees won’t see much benefit. One issue lies in the CPI-W itself — it measures inflation for urban wage earners, not retirees, meaning it often overlooks cost spikes that affect seniors most, like housing and health care.
According to TSCL, from 2010 to 2024, Social Security’s buying power dropped 20% — what $100 bought in 2010 now buys only $80 worth of goods. Rising costs for shelter and medical services continue to outpace COLAs, eroding retirees’ real income.
Medicare Costs
Another obstacle is Medicare Part B premiums, which are automatically deducted from most retirees’ Social Security checks. After two consecutive 5.9% increases, the 2026 Medicare Trustees Report projects an 11.5% jump, raising the monthly premium to $206.20.
For many seniors, that spike could wipe out much or all of their COLA increase.
Even as Social Security makes history, retirees may still struggle to stay ahead, feeling that their benefits aren’t stretching as far as they once did.
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