Social Security COLA 2026 updates: What retirees need to know

Cost-of-Living Adjustments (COLA) are designed to help Social Security benefits keep up with inflation, ensuring that beneficiaries' purchasing power remains stable. However, as inflation levels fluctuate, the COLA for 2026 is expected to be smaller than in previous years, leaving many recipients facing a reduced increase in their benefits. This marks the first time since 2021 that retired workers have not received a larger pay increase.

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What is the latest COLA update?

The Senior Citizens League which is a nonpartisan advocacy group recently lowered its 2026 COLA forecast to just 2.2%, sparking concern among thousands of retired individuals. According to the Motley Fool report which surveyed retired workers, the COLAs 2024 and 2025 could not compensate for the rising prices in the economy. While Social Security is one of the key sources of income for the retired population, senior citizens in recent times believe that it has failed in the wake of inflation.

Thus, the senior citizens advocate for a larger COLA, however, this might not be possible. The latest SCL projects reveal that the COLA is expected to decrease even more this year making the impact of inflation even harder on the retired population.

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What is the projected COLA for 2026?

The projected COLA for 2026 is estimated at 2.1%, with some forecasts predicting as low as 0.06%. Meanwhile, the COLA for 2025 is expected to be around 2.5%, reflecting a slight dip in inflation. The official announcement for the 2026 adjustment is anticipated in October, as reported by The Economic Times.

To address the financial strain on retirees, the proposed Senior Citizens Tax Elimination Act seeks to eliminate taxes on Social Security benefits, offering seniors potential savings of up to $3,000 annually.

COLAs are determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks changes in prices based on the spending habits of hourly workers. The COLA is calculated as the percentage increase in the CPI-W from the third quarter of the previous year to the third quarter of the current year. This method ensures that Social Security benefits keep pace with inflation, although recent forecasts suggest a smaller increase for 2026.