Social Security 2026: Early COLA Predictions Could Be Bad News for Retirees
Written by
Tobi Opeyemi Amure
Edited by
Amber Barkley
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Millions of retirees face growing financial uncertainty as early projections suggest Social Security’s 2026 cost-of-living adjustment (COLA) could drop to 2.1%. This is the lowest increase since the COVID-19 pandemic began. Senior Citizens League (TSCL), a nonpartisan advocacy group, reported that the cause of this drop is cooling inflation trends and Federal Reserve rate cuts.
For retirees already struggling with rising healthcare and housing costs, this modest adjustment risks widening the gap between stagnant benefits and everyday expenses.
Retirees Brace for Financial Strain
The 2.1% raise is about $46 extra for each month, nowhere near the $3,000 annual shortfall that inflation is eating at many, according to Shannon Benton, executive director of the Senior Citizens League.
“If housing and even healthcare costs continue to climb, a $2,000 benefit isn’t going to do your retired senior much good,” Benton said.
Medicare premiums are running outgrowing benefit shares while healthcare remains a critical pressure point. Morningstar analysis shows that seniors spend 25% more than younger households on medical costs, but COLAs rarely keep up with the costs.
Benton explained that healthcare costs and inflation for older people exceed COLA adjustments. “The gap forces them to forgo medical treatments, or to do part-time work or forage money.”
Why the 2026 COLA Might Decline
Federal agencies project a lower Social Security cost-of-living adjustment (COLA) for 2026 due to cooling inflation. The Bureau of Labor Statistics uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which rose 0.1% in July 2024, 0.04% in August 2024 and 0.13% in September 2024, before slowing further. Also, the Federal Reserve cut interest rates by 1% total between September and December 2024 to stabilize the economy.
While these trends show slowing inflation overall, they do not address the higher healthcare and housing costs that disproportionately strain retirees, Benton said.
The CPI-W, used to calculate COLAs, is measured based on the spending patterns of urban wage earners, not retirees. This approach ignores how seniors’ budgets need more money to pay for healthcare and housing. Medical care costs increased 2.7% over the previous year, and shelter costs increased 4.4% in January 2025 — significantly more than the CPI-W. But these fundamentals make retirees’ finances all the more stressed.
Policy Reforms and Retiree Strategies
In February 2025, Congressman Thomas Massie put forward a bill (H.R. 1040) that would eliminate federal taxes on Social Security benefits. This legislation, according to The Senior Citizens League, would save the typical senior household $3,000 annually if adopted.
Benton supports this but stressed broader reforms: “Switching to the CPI-E, which weights senior expenses accurately, would prevent systemic underpayments.”
Social Security Intelligence pointed out that the CPI-E has historically surpassed CPI-W by 0.2% per year, a differential that grows cumulatively over time.
Proactive budgeting and working part-time can help retirees offset part of the loss. Benton suggested downsizing homes, comparing Medicare Advantage plans and using community assistance programs. Supplemental income may be gained through annuities and reverse mortgages, but they come with conditions.
She said, “Every dollar spent on utilities or groceries is taken away from what has to be spent to prolong longevity.”
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