Next year, retirees and other beneficiaries can anticipate a modest increase in their Social Security benefits. The Social Security Administration (SSA) is expected to announce the 2026 cost-of-living adjustment (COLA) in the fall, and current projections suggest a rise of around 2.6%.
- 0.1 Understanding the COLA
- 0.2 Factors Influencing the COLA
- 0.3 2026 COLA Projections: A Closer Look
- 0.4 Impact on Social Security Benefits
- 0.5 The Catch-22 of COLAs
- 0.6 The “Hold Harmless” Provision: A Safety Net
- 0.7 How the COLA is Calculated: A Deeper Dive
- 0.8 Proposals for Change: The CPI-E
- 0.9 Illustrative COLA Calculation
- 0.10 The Importance of COLA Projections
Understanding the COLA
The COLA is designed to protect the purchasing power of Social Security benefits and Supplemental Security Income (SSI) payments by adjusting them annually to reflect changes in the cost of living. This adjustment affects over 72.5 million Americans who rely on these benefits. The COLA is calculated based on the percentage change in a specific subset of the Consumer Price Index (CPI).
In 2025, the COLA was 2.5%, which translated to an average monthly benefit increase of approximately $49. While the projected 2.6% increase for 2026 is slightly higher, it’s not expected to be a substantial boost.
Factors Influencing the COLA
The COLA is not based on the overall Consumer Price Index for all Urban Consumers (CPI-U). Instead, it relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset that tracks the expenses of a narrower segment of the population.
Furthermore, the COLA calculation only considers inflation rates from July, August, and September (the third quarter) compared to the same period in the previous year. For example, while the CPI-U rose 2.9% from December 2023 to December 2024, the COLA calculation uses the CPI-W data from the third quarter to determine the adjustment.
2026 COLA Projections: A Closer Look
Experts closely monitor inflation data to refine their COLA projections. The Senior Citizens’ League (TSCL) has been updating its forecast based on the latest inflation figures.
Here’s a summary of the projected cost-of-living adjustments for 2026, along with the corresponding CPI rates:
- July: 2.6% (CPI rate: 2.6% – released in July for June)
- June: 2.5% (CPI rate: 2.2% – released in June for May)
- May: 2.4% (CPI rate: 2.1% – released in May for April)
- April: 2.3% (CPI rate: 2.2% – released in April for March)
- March: 2.2% (CPI rate: 2.7% – released in March for February)
- February: 2.3% (CPI rate: 3.0% – released in February for January)
- January: 2.1% (CPI rate: 2.8% – released in January for December)
As of June, TSCL’s projection stands at 2.6%, reflecting a gradual increase in their estimates over the past few months.
Impact on Social Security Benefits
To illustrate the potential impact of a 2.6% COLA, consider the average Social Security monthly check for retired workers, which was $2,005.05 as of June 2025. A 2.6% COLA would translate to an average monthly increase of approximately $52.13, or an annual increase of $625.58.
The Catch-22 of COLAs
Social Security beneficiaries face a challenging situation. A significant COLA typically occurs when inflation is high, which can erode purchasing power even with the increase. Conversely, low inflation, while generally beneficial for fixed incomes, results in a smaller COLA.
The “Hold Harmless” Provision: A Safety Net
To protect Social Security recipients from having their benefits reduced due to increases in Medicare Part B premiums, a “hold harmless” provision exists. This provision ensures that Social Security payments do not decrease from one year to the next if the rise in the Medicare Part B premium exceeds the COLA.
For 2025, the standard Medicare Part B premium is $185, which is $10.30 higher than the 2024 premium. The hold harmless provision applies to Social Security recipients who have their Part B premiums automatically deducted from their monthly Social Security benefits.
To qualify for the hold harmless provision, individuals must:
- Receive Social Security benefits or be eligible to receive them for November and December of the applicable year.
- Have their Medicare Part B premiums for November through January deducted directly from their monthly Social Security benefits.
However, the hold harmless provision does not apply in certain situations, including:
- Individuals enrolling in Part B for the first time in the applicable year.
- Those paying an income-related monthly adjustment amount (IRMAA) premium and not having it deducted from their Social Security check.
- High-income Social Security recipients required to pay IRMAA for Part B and Part D coverage.
- Individuals whose Medicare Part B premiums are paid by their state Medicaid agencies.
How the COLA is Calculated: A Deeper Dive
The CPI-W serves as the benchmark for calculating the annual COLA. This index reflects the spending patterns of urban households where more than half of their income comes from clerical and hourly wage jobs, representing approximately 29% of the U.S. population.
To determine the inflation index, price changes are averaged, with each item weighted according to its importance in the spending of this particular group.
Proposals for Change: The CPI-E
Over the years, there have been discussions about changing the inflation index used to calculate the COLA. Some advocate for using the Consumer Price Index for Americans aged 62 or older (CPI-E) instead of the CPI-W.
The CPI-E is designed to more accurately reflect the costs faced by older adults. For instance, medical expenses, which disproportionately affect seniors, are weighted more heavily in the CPI-E. In one year, medical care was weighted at 6.9% by the CPI-U, 5.6% by the CPI-W, and 11.3% by the CPI-E. A similar difference existed for medical care services, with weightings of 5.2%, 4.3%, and 8.3%, respectively.
Illustrative COLA Calculation
To illustrate how the COLA is computed, consider the third-quarter CPI-W numbers from a previous year:
| Month | Year 1 | Year 2 |
| ——— | —— | —— |
| July | 299.899| 308.501|
| August | 301.551| 308.640|
| September | 302.257| 302.257|
| Total | 903.707| 926.187|
| Average| 301.236| 308.729|
In this example, the CPI-W for the third quarter of Year 2 is 308.729. Because this average exceeds 301.236 by 2.5%, the COLA effective for December of Year 2 would be 2.5%. The calculation is: (308.729 – 301.236) / 301.236 x 100 = 2.5%.
The Importance of COLA Projections
COLA increases, whether small or large, directly affect beneficiaries’ ability to manage expenses and save for unexpected needs. Even a seemingly small difference of 0.1% can have a cumulative impact over time.
Given that Medicare Part B premiums are projected to increase significantly, a modest COLA could be largely offset by these rising healthcare costs. Therefore, tracking COLA projections is crucial for beneficiaries to anticipate potential financial challenges and adjust their spending and savings plans accordingly.
