This Is How Much Inflation Has Increased Over the Last 10 Years -- and How Social Security COLAs Compare

Many retirees have been feeling the pinch of rising costs amid soaring inflation, with the inflation rate recently reaching a three-year high.

Annual cost-of-living adjustments (COLAs) are supposed to help Social Security benefits maintain their buying power, but with inflation staying stubbornly high, it's becoming harder for the COLAs to keep up. Over time, this could spell trouble for retirees.

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How COLAs compare to historic inflation

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is one of the primary metrics used to track inflation. It measures the average change in prices of everyday goods and services, and it's also what the Social Security Administration uses to calculate COLAs.

The COLA is based on an average of third-quarter CPI-W figures. That average is compared to the average from the same period a year earlier, and if it's higher, the percentage difference will be the COLA for the following year. Because the COLA is based only on third-quarter data, it doesn't always reflect how inflation has affected seniors throughout the year.

Between April 2016 and April 2026, the CPI-W has increased by close to 40%. To be fair, some inflation is normal, so it's not necessarily surprising that the CPI-W has increased over the last decade.

The problem is that COLAs haven't kept up. Over the last 10 years, Social Security benefits have lost around 13% of their buying power, according to a 2026 report from nonpartisan advocacy group The Senior Citizens League. In other words, $1 in 2016 benefits is the equivalent of around $0.86 in 2026 benefits.

The problem could get worse

Inflation isn't the only problem Social Security is facing. The program's two trust funds are also rapidly dwindling, which could lead to benefit cuts within the decade.

Analysts at the Congressional Budget Office estimate that the Old-Age and Survivors Insurance (OASI) fund -- which covers retirement benefits -- will run out by 2032. If that happens, benefits could be slashed by around 28%, the report revealed.

Whether Social Security can get back on its feet will depend largely on Congress. Lawmakers are running out of time to find a solution to Social Security's cash shortfall, and there's a growing risk that retirees will face both inflation-eroded buying power and substantial benefit cuts.

So what can retirees do? If you can swing it, it's wise to start building up additional sources of income. That could mean saving more or delaying benefits if you're not already retired, or perhaps picking up part-time work if you are. It's not easy to reduce your reliance on Social Security, but even small steps can make a big difference.

Hopefully, lawmakers will implement useful changes to Social Security in the next few years to both protect the trust funds and help COLAs keep up with inflation. But until then, it's a good idea to prepare your finances as much as you can.

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