Social Security Cost-of-Living Adjustment (COLA) is an essential component of the United States Social Security system, implemented to maintain benefits by adjusting them relative to the levels of inflation. COLA keeps the purchasing ability of the recipients of Social Security intact by enhancing their benefits on an annual basis depending upon variations in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). As 2026 draws near, it is imperative to make projections about the forthcoming COLA while planning and budgeting for the beneficiaries.
2026 COLA projections
Early estimates of 2026 forecast a small COLA increase. The Senior Citizens League is forecasting a 2.3% adjustment, which is only less than the 2.5% 2025. Another estimate by the Military Officers Association of America (MOAA) is a COLA of approximately 2.1% for 2026, continuing the trend of declining increases from the record increases of the early 2020’s.
The COLA is determined from the third-quarter figures of the previous year. Here, as the benchmark for calculation, the CPI-W, which measures inflation for urban wage earners and clerical workers, is utilized. The actual COLA will therefore differ depending on the performance of the economy and overall rates of inflation for the entire duration of one year.
During the past few years, COLAs have varied widely. The COLA in 2023 was a resounding 8.7% due to hyperinflation following the COVID-19 pandemic. Adjustments have dipped, though, since then, with an increase of 3.2% in 2024 and 2.5% in 2025. Decreasing rates of inflation and stabilization of the economy have led to such reduced adjustments.
Impact of COLA on beneficiaries
- Maintaining buying power: The main function of the COLA is to protect Social Security benefits from being decreased by inflation. Nonetheless, others have argued that the formula employed might not be accounting for all the costs seniors are encountering, especially regarding medical care.
- Tax implications: Whereas COLAs assist with maintaining purchasing power of benefits, they also generate extra taxes owed by certain beneficiaries. With the rise of benefits, an ever-larger proportion of benefit is subject to tax, contingent upon the individual’s overall income.
Recommended alternatives for calculating COLA
There has been debate about changes to the COLA formula to more accurately reflect seniors’ costs. Among these has been the suggestion that the Consumer Price Index for the Elderly (CPI-E) be used, an adjustment that would increase the COLA by 0.2 percentage points each year. These adjustments are yet to be acted upon legislatively and are not yet in effect.
Looking ahead to 2026, the Social Security COLA will be pretty mild, around 2.1% to 2.3%. Such adjustments, while they maintain benefit purchasing power, don’t always adjust fully for inflationary pressures on seniors. There is still consideration along the lines of redoing the COLA calculation that can bring in the potential for future adjustments, but as it stands now, recipients will have to plan under current expectations.
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