Once you start collecting Social Security, you may end up getting benefits for 10, 20, or 30 years. But over that long a period of time, the cost of living is likely to increase.
Thankfully, Social Security benefits are designed to rise as living costs keep going up. Each year, those benefits are eligible for an automatic cost-of-living adjustment, or COLA, that’s tied directly to inflation.
The process for implementing COLAs is seamless. Lawmakers do not need to vote on a raise every year. Rather, COLAs are pegged to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
When there’s a rise in the CPI-W year over year, Social Security benefits increase. When the CPI-W decreases or stays flat, Social Security benefits don’t get a COLA. However, they also do not decrease from year to year.
At the start of 2026, Social Security benefits got a 2.8% COLA. And that’s by no means the smallest COLA on record.
But that 2.8% COLA is also quietly losing ground to inflation. And a lot of seniors may be hurting because of it.
Why 2026’s Social Security COLA is already failing seniors
Social Security COLAs are backward facing — meaning, they’re based on previous inflation data. Once a COLA is established for a given year, it can’t be adjusted during the year. So if inflation surges during that year, seniors on Social Security can lose buying power.
That’s exactly what’s happening this year. The Iran conflict has led to a massive surge in oil prices. As a result, inflation is up on a whole.
In April, the CPI-W rose 3.9% on a year-over-year basis. But since Social Security benefits only got a 2.8% COLA and that amount cannot be adjusted during the year, retirees aren’t getting great mileage out of that raise. In fact, many are probably falling behind on bills or having to make hard choices because costs are rising than their benefits rose.
A flaw in the COLA formula doesn’t help
Even though a recent uptick in inflation isn’t helping matters, Social Security recipients were basically doomed from the start this year in terms of their COLA. That’s because the cost of Medicare Part B rose significantly, eating into that raise.
That speaks to a larger issue with Social Security COLAs. The CPI-W is not very reflective of the costs Social Security recipients bear.
Social Security retirees tend to spend a larger portion of their income on healthcare than younger folks and wage earners. And healthcare costs tend to rise at a quicker pace than broad inflation.
The CPI-W does not account for that, though. As a result, Social Security recipients tend to lose out on buying power even during periods when their COLAs are more generous.
At this point, experts are anticipating a larger COLA in 2027 than in 2026 due to a recent increase in inflation. But that doesn’t mean next year’s COLA will actually help Social Security recipients keep up with inflation. Until a change is made to the COLA formula, seniors might continue to quietly lose buying power year over year.
It’s important that workers today understand the limits of COLAs so they can plan accordingly. Saving well for retirement is a great way to make up lost ground, since a robust portfolio with the right investments can potentially outpace inflation and compensate for less effective Social Security raises each year.
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