Millions of Americans rely on Social Security to cover their daily expenses; for many, this benefit is their main source of income. However, inflation has caused their purchasing power to decrease over time. That's why each year, Social Security adjusts its payments to try to keep up with rising living costs.
What is the cost of living adjustment (COLA)?
The cost of living adjustment, or COLA, is an automatic increase in Social Security payments. Its goal is to help beneficiaries keep their purchasing power in the face of inflation. The idea is that if prices go up, payments should also rise, so that income doesn't lose real value.
This adjustment is based on the inflation index measured during the third quarter of the year (July, August, and September). The Social Security Administration compares the current index with that of the same period the previous year. If there's an increase, that percentage is applied as a raise to payments for the following year; if there's no increase, COLA will be zero.
What can we expect for 2026?
In 2025, COLA was 2.5%, which meant an increase in benefits starting in January. For 2026, a similar increase is expected, close to 2.6 or 2.7%, according to recent estimates. These figures may change, since the official adjustment will be announced on October 15 with the final data from the third quarter.
This small increase may seem positive, but many retirees feel it's not enough. Inflation in the prices of goods and services they consume is often higher than the official rate. In fact, a recent study showed that 80% of older adults believe real inflation exceeds 3%, more than what the government reports.
Why doesn't COLA always reflect reality?
One of the main problems is how inflation is measured. Currently, an index is used that reflects the expenses of younger urban workers, whose needs and consumption patterns are different from those of older adults.
Many experts and groups like the Senior Citizens League suggest changing how COLA is calculated. The idea is for it to better reflect the actual expenses retirees face. For example, using a specific index for older adults could better reflect increases in health care, medications, and other essential expenses they face.