Social Security COLA set to fall again as seniors feel the pinch

The cost-of-living adjustment for Social Security benefits is expected to drop in 2026, intensifying the financial burden on seniors who say that Social Security adjustments are already inadequate.

Annual cost-of-living adjustments, known as COLAs, can make or break budgets for many seniors who rely on Social Security benefits. In 2025, beneficiaries saw their benefits increase 2.5% to adjust for inflation — a roughly $50 increase in monthly benefits on average.

As inflation cools, the agency is projected to issue a lower cost-of-living adjustment of 2.2% for 2026, according to new estimates from The Senior Citizens League, a nonprofit senior group. 

Over the past 50 years, Social Security benefits have been adjusted annually in relation to CPI-W, a measure of inflation that looks at a basket of expenses for urban wage earners and clerical workers. Although Social Security is tied to a direct measure of inflation, financial advisors say that seniors still feel their benefits lag behind the economic reality.

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"For those that are in their retirement ages, the COLA does not represent the true cost of many staples that seniors need to live on including food, gas, rent, insurance and energy," said John Bell, founder of Free State Financial Planning in Highland, Maryland. "Those are non-negotiable costs that have gone up dramatically over the last five years and are not reflected accurately in the CPI-W."

Many costs far outpacing Social Security COLA

One non-negotiable cost many advisors point to is Medicare Part B premiums. According to the Centers for Medicare & Medicaid Services, Part B premiums increased at more than twice the rate of Social Security's COLA in 2025, with premiums up 5.9%. Because Part B premiums are commonly deducted from Social Security checks, that discrepancy can lead to beneficiaries seeing smaller monthly checks even after cost-of-living increases.

Rising premiums aren't limited to Medicare. Noah Damsky, founder of Marina Wealth Advisors in Los Angeles, said that one of his clients was "furious" to see their home insurance premium increasing by 20%.

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"COLA adjustments are completely out of touch," Damsky said. "We see costs increasing by far more than a few percent per year. With local minimum wage jumping to $20 per hour, insurance costs skyrocketing, stubborn gas prices, housing prices and mortgage-related [expenses] remaining elevated, costs are rising much faster than SSI [Supplemental Security Income] COLA adjustments."

Would pegging the COLA to CPI-E be a better measure?

Advisors and advocates say that moving to a different inflation measure, like CPI-E, could help COLA keep up with reality. CPI-E, an inflation measure intended to more closely track the expenses of older people, saw a 3% year-over-year increase in 2025. If inflation were tied to CPI-E instead of CPI-W, this year's COLA would be 0.5% higher than it was.

From one year to the next, CPI-E doesn't always exceed the current inflation measure for COLA — it lagged behind CPI-W for seven of the last 25 years — but advocates say it would boost benefits over the long term. Since 1999, CPI-E has increased 93%, whereas the CPI-W saw an 88% increase. For retirees, that would have resulted in roughly 5% bigger monthly benefits.

"CPI-E … may be a better tool, but it would require a change in legislation and increased costs to Social Security over time," said Charles Kyle Harper, founder of Harper Financial Planning in West Columbia, South Carolina. "That could prove difficult to enact."

Last year, then-Sen. Bob Casey, a Democrat from Pennsylvania, introduced legislation that would direct the Social Security Administration to begin using CPI-E as the basis for future cost-of-living adjustments. The bill, co-sponsored by Sens. Richard Blumenthal, Peter Welch, John Fetterman, Kirsten Gillibrand and Bernie Sanders, failed to advance during the last congressional session and has not been reintroduced by any current senator.

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Even if the Social Security Administration were to begin using CPI-E for future adjustments, advisors say that seniors could continue feeling squeezed by the annual COLA, which inherently lags behind current inflation.

"COLAs are based on past inflation data and only adjust once a year, while prices — especially for things like food, housing and medical care — can fluctuate more frequently," said Daniel Milks, co-founder and operations officer of Woodmark Wealth Management in Greenville, South Carolina. "By the time an increase kicks in, retirees may have already felt months of higher costs, leading to the perception that Social Security isn't keeping up."

Advisors say they work with their clients to ensure Social Security is just one part of a broader retirement income strategy. But for retirees who rely on benefits as their main source of income, advisors say it can be difficult to work around the fact that Social Security continually trails the day-to-day economic reality.

"I don't think there is any way to help address this with seniors that is factual," Bell said. "The seniors are living the reality and advisors can help them budget better, invest better in inflationary environments and hopefully counsel them through this tough time. But the reality is that the COLA adjustments are not representative of real inflation."