The Projected COLA Adjustment For 2026 Is A Mixed Bag For Seniors

According to the most recent data from the Social Security Administration (SSA), more than 71 million Americans received benefits from the organization in 2023. Some of those recipients are younger folks with disabilities that prevent them from working. Alternatively, spouses and children of deceased workers may also be eligible. However, the vast majority — about 78% — of social security checks go to senior citizens age 62 and older. 

Like consumers of all ages, seniors on social security must cope with inflation weakening the purchasing power of their dollars. But unlike working-age citizens, retired seniors relying on a fixed income don't have the option to negotiate a raise in salary to compensate. Nor the option to move to a different position or employer if their income isn't keeping pace with inflation, or better. 

Instead, social security recipients like seniors rely on the SSA's cost-of-living adjustments (COLA) to compensate for the seemingly ever-higher repercussions of inflation. In the earlier years of social security, there were no regular cost-of-living adjustments. COLAs were an inconsistent act of congress that happened just 11 times over the course of 35 years. However, beginning in 1975, COLA started to occur on a regular annual basis. With that history lesson over, let's take a look at the recently-released COLA projection for 2026 and how it will impact seniors nationwide.

In the recent past, the Covid-19 pandemic and subsequent lockdowns caused both supply chain issues and an abundance of stimulus from the federal government. As a result, inflation ran much hotter than usual and the COLA for seniors were outsize to compensate during this era. Nowadays, inflation is still somewhat higher than normal, but at least appears to be moderating somewhat. Hence, the projected 2026 COLA for social security recipients is expected to be just 2.1%.

The be sure, that 2.1% COLA will be the smallest in five years. Still, it's very close to the annual average increase since 2010, which is 2.3%. Considering the average payment that retired workers receive, that 2.1% increase represents an extra $41 per month. That brings the new average social security check for seniors to $2,017 per month. So while we've established that the 2026 estimated COLA of 2.1% is commensurate with falling inflation and roughly in line with long-term historical norms, there is a nonetheless a downside that seniors should be aware of.

The bad news for seniors regarding the projected 2.1% COLA for 2026 is that not all inflation is created equal. While 2.1% might be appropriate when taking overall inflation into account, certain sectors of the economy are outpacing the average. For instance, the Consumer Price Index for all urban consumers (CPI-U), not just consumers of working age, states that the cost of shelter rose at a rate of 4.6% over the past 12 months. That begs the question if future generations will ever be able to afford a home.

Meanwhile, data from that same organization shows that the cost of healthcare rose 3.4% over the course of 12 months ending in December 2024. That means the cost of both shelter (housing) and healthcare both exceeded the estimated 2026 COLA. Therefore, seniors' dollars aren't going to stretch as far in these particular key areas. In particular, older Americans use medical care more frequently than their younger counterparts.

For now, the projected 2026 cost-of-living adjustment is indeed just an estimate. And a very early estimate at that. The official 2026 COLA figure will be announced in October 2025, which gives the Social Security Administration several more months to observe inflation patterns before making its final determination. As well, President Donald Trump has flirted with the idea of eliminating federal income tax on social security payments, which would be a massive boon to seniors.