Despite early predictions regarding social security cost adjustments since 1997, salary increases slated for next year may not be sufficient for most beneficiaries.
One of the biggest announcements for over 70 million Social Security recipients is just around the corner. On October 15th, the Social Security Agency (SSA) is set to reveal the 2026 Cost of Living Adjustment (COLA), which many beneficiaries are eagerly waiting for.
This upcoming announcement is especially crucial for older workers, as a Gallup survey spanning 24 years indicates that many rely on Social Security checks for everyday expenses.
The anticipated Social Security increase in 2026 could mark a significant moment—it’s the first such raise in the 21st century. But unfortunately, it may still fall short for many involved with the program.
Understanding How Social Security COLA Is Determined
The rationale behind Social Security’s cost-of-living adjustment is to counteract inflation. Simply put, if the prices of goods and services, which older individuals typically buy, rise, then Social Security benefits should also increase to help maintain their purchasing power. The SSA uses COLA to assist recipients in handling inflationary pressures.
In its first 35 years (1940-1974), the program’s payment history lacked a consistent method for adjusting benefits. Only a handful of adjustments were made through special Congressional sessions, including a staggering 77% increase in 1950.
From 1975 onwards, the consumer price index for urban wage earners and clerical workers (CPI-W) has provided a method for calculating annual COLA. This index encompasses over 200 spending categories, each weighted differently. This allows CPI-W to be represented as a single figure reported monthly, effectively illustrating whether prices are rising (inflation) or falling (deflation).
A notable detail about Social Security’s COLA is that only the CPI-W readings from the third quarter (July through September) are factored in. The Bureau of Labor Statistics (BLS) will release the September inflation data on October 15th, which will give the SSA the final information needed to announce the cost-of-living adjustments for 2026.
If this year’s average CPI-W reading for the third quarter outpaces the same period last year, the difference is then rounded to the nearest 0.1%. This figure is what determines the pay raise for beneficiaries.
Predicted Increase in Social Security COLA for 2026
The aim of Social Security’s cost-of-living adjustments is to respond to the inflation challenges that beneficiaries face. Consequently, this has led to above-average pay raises in recent years.
The dramatic rise in the money supply during the COVID-19 pandemic has coincided with the highest inflation rates seen in 40 years. This has resulted in increases of 5.9% in Social Security checks for 2022, 8.7% for 2023 (the largest since 1982), 3.2% for 2024, and 2.5% for 2025. For context, the average COLA since 2010 has been around 2.3%.
Between 1988 and 1997, the COLA fluctuated between 2.6% and 5.4%. If the increase in 2026 hits 2.5% or more, it would be the first time this century it has reached that level, or exceeded it in 29 years. This means Social Security recipients might see some substantial growth in their monthly payments.
After the BLS published its August inflation report, the nonpartisan senior advocacy group The Senior Citizens League (TSCL) suggested a 2.7% COLA for next year. Meanwhile, independent social security and Medicare policy analyst Mary Johnson estimates a 2.8% salary increase for 2026.
If we assume the lower forecast of a 2.7% COLA is accurate, here’s how the average monthly benefits for key Social Security groups might change in 2026:
- Retired workers: For the first time, the average monthly benefit for retired workers is expected to surpass $2,000, with an increase of about $54.22, bringing it to nearly $2,063.
- Workers with disabilities: For over 7 million individuals facing long-term disabilities, average monthly payments may rise by about $42.73, reaching approximately $1,626.
- Survivor beneficiaries: Around 5.8 million survivors of deceased workers could see their average monthly benefit increase by $42.53, bringing it close to $1,618.
The Reality of 2026 Salary Increases for Most Beneficiaries
While projections of 2.7% or 2.8% indicate continuing above-average salary growth, the reality is that many beneficiaries might find their 2026 adjustments offset by rising costs elsewhere.
For instance, a Medicare report released in mid-June pointed to a projected double-digit increase in Part B premiums next year. Part B, which covers outpatient services, typically has its premiums deducted from monthly Social Security payments for beneficiaries enrolled in both programs.
The premiums for Medicare Part B increased by 5.9% annually in 2023 and 2024. Current forecasts anticipate an 11.5% increase for 2026, which could significantly offset the anticipated COLA for many retired workers.
Moreover, the purchasing power of Social Security dollars has been declining sharply since the beginning of this century.
Even though the CPI-W represents an improvement compared to the arbitrary adjustments made before 1975, it still has flaws. Specifically, the CPI-W reflects costs relevant to “urban wage earners and clerical workers,” who are generally younger and not yet involved with Social Security.
Given that 87% of Social Security beneficiaries are over 62 years old, relying on inflation data tied to working-age Americans presents a challenge. Key costs for seniors, like housing and healthcare, aren’t adequately weighed in a way that impacts their financial situations. According to TSCL analysis, older Social Security beneficiaries have seen a 20% decrease in purchasing power since 2010.
Even with a decent salary increase on the horizon, it seems likely that the 2026 COLA will still be insufficient for most beneficiaries.
