Each year, the Social Security Administration (SSA) adjusts the benefits it provides to keep pace with inflation. This increase, known as the Cost-of-Living Adjustment (COLA), ensures that recipients maintain their purchasing power even as everyday expenses rise. While the official 2026 COLA won’t be announced until October 2025, early projections from The Senior Citizens League give us a glimpse of what to expect—and what it means for millions of Americans.
Understanding How COLA is Calculated
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a metric released monthly by the Bureau of Labor Statistics (BLS). It measures changes in prices of goods and services such as food, housing, clothing, medical care, and transportation—specifically for working Americans in urban areas.
Each year, the SSA compares the average CPI-W from the third quarter (July–September) of the current year to the same period from the previous year. If there’s an increase, beneficiaries receive a COLA that reflects that rise in cost.
However, there are two key issues with this method:
- Lagging Data: COLA is applied retroactively, based on past-year inflation trends, which may not accurately reflect the upcoming year’s economic conditions.
- Mismatch with Retiree Needs: CPI-W is geared toward younger, employed individuals. It doesn’t account for the spending patterns of retirees—especially seniors who spend disproportionately more on healthcare, an area where inflation often outpaces general price levels.
2026 COLA Projection: What It Could Mean
The Senior Citizens League currently forecasts a 2.4% COLA increase for 2026, the lowest since before the COVID-19 pandemic. This reflects a slowdown in inflation and increased price stability, which is broadly positive for the economy. But for fixed-income beneficiaries, a lower COLA may feel insufficient given the ongoing cost-of-living pressures.
| Year | COLA Increase |
|---|---|
| 2023 | 8.7% |
| 2024 | 3.2% |
| 2025 | (Pending) |
| 2026 (Est.) | 2.4% |
While a lower adjustment may suggest the economy is cooling, many retirees are still struggling to keep up with expenses like food, housing, and medical bills—costs that remain high even if the overall inflation rate is falling.
Who Benefits From COLA?
COLA increases impact a broad range of recipients, not just retirees. They also apply to:
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
- Veterans Affairs (VA) Disability Compensation
VA benefits, while separate from SSA programs, are tied to the same annual COLA figure. According to the SSA, the VA compensates veterans with service-connected disabilities, including physical injuries and mental health conditions stemming from military service. Many veterans depend heavily on these payments for basic needs, and even small COLA changes can significantly affect their financial well-being.
How Retirees and Veterans Can Prepare
A COLA increase—regardless of size—is not a substitute for comprehensive financial planning. For those depending on Social Security or VA benefits, diversifying income is key to long-term stability.
Here are a few steps beneficiaries can take:
- Invest Regularly: Even modest contributions to retirement accounts or brokerage investments can grow significantly over time thanks to compound interest.
- Delay Benefits (if possible): Waiting until full retirement age or later to claim Social Security can increase monthly payments.
- Use Part-Time Work: Many retirees pick up part-time or freelance work to supplement income without significantly disrupting their benefits.
- Cut Unnecessary Costs: Tracking expenses and downsizing where possible can free up money for savings or investment.
Planning Ahead
While a 2.4% COLA increase might seem modest, it’s still a critical adjustment to help beneficiaries manage the pressures of inflation. That said, no one should rely solely on these annual increases for financial security. Whether you’re nearing retirement, already receiving benefits, or planning ahead, the best strategy includes a mix of Social Security, savings, investments, and if possible, alternative income sources.
FAQs
What is the COLA forecast for 2026?
The Senior Citizens League currently projects a 2.4% increase, the lowest since before the pandemic.
Does COLA apply to VA disability compensation?
Yes. VA disability payments are adjusted annually based on the same COLA used for Social Security.
Is a lower COLA bad for retirees?
Not necessarily. It usually means inflation is stabilizing. However, seniors with higher healthcare and housing costs may still feel squeezed.