The Social Security Administration (SSA) applies an annual cost-of-living adjustment (COLA) to keep pace with rising prices. The Senior Citizens League, a nonprofit organization, has released its latest estimate of a 2.5% COLA for 2026, which is the same as the previous year but below the average since 1975.
To determine the annual COLA, Social Security considers the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation published monthly by the Bureau of Labor Statistics. The SSA averages CPI-W data from the third quarter of the current year to calculate the COLA.
Historically, the average annual COLA has been 3.4%, but amounts have varied widely. In recent years, the COLA has not kept pace with inflation enough to reasonably cancel out its effects. According to the Senior Citizens League, the buying power of Social Security benefits has decreased by 20% since 2010.
Some argue that the CPI-W may not be the best metric for determining the COLA, as it does not include certain healthcare costs common among retirees. A study by the Congressional Research Service suggests using the Consumer Price Index for the Elderly (CPI-E) instead could result in larger COLAs and higher monthly Social Security benefits.
With the official COLA announcement expected in October, it’s essential for current and soon-to-be retirees to plan their finances accordingly. The best thing retirees can do is prepare for a potentially below-average COLA and begin planning accordingly.
Source: https://eu.usatoday.com/story/money/personalfinance/retirement/2025/07/05/2026-cola-estimate-social-security-raise/84413425007