Why COLAs Have Lost Retirees 14% of Their Buying Power Since 2016

The average Social Security benefit is the highest it's ever been, $2,084 per month as of June 2026. The average spousal benefit is on the cusp of reaching four figures for the first time. Yet many Social Security beneficiaries aren't satisfied, and they may even believe their benefits don't go as far as they used to.

If you're among them, you're not imagining things. Social Security benefits are actually losing their buying power, and there's one key reason why.

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Why Social Security's buying power keeps shrinking despite COLAs

Social Security benefits continue to increase annually thanks to cost-of-living adjustments (COLAs), and some of the COLAs in recent years have been large, including an 8.7% boost in 2023. But benefits have lost 13.7% of their buying power over the last 10 years, according to research from the Senior Citizens League.

This makes sense when you look at how the Social Security Administration calculates COLAs. It bases them on changes in third-quarter inflation data from one year to the next, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The Consumer Price Index measures the cost of a bundle of common goods and services over time, but the CPI-W looks only at the spending habits of urban households in which at least one person has been employed for at least 37 weeks out of the past 12 months and at least 50% of the household's income comes from wages. That naturally rules out most retiree households.

Obviously, retirees also have to buy food and clothing and pay for transportation, among other things. But there are notable differences in senior spending habits, including much higher healthcare spending than you typically see among working adults. Healthcare expenses tend to climb much faster than other spending categories, which can lead to Social Security checks that increase but don't keep pace with rising costs.

There's a possible fix, but don't expect it soon

Interestingly, there's another index -- the Consumer Price Index for the Elderly (CPI-E) -- that focuses specifically on senior spending. Switching to CPI-E COLAs would give Social Security beneficiaries more money in most years, but it's not likely to happen in the near future.

Changing the COLA calculation would require Congress to pass a new law, and it's unlikely to do so with Social Security now just six years from insolvency. Increasing COLAs could accelerate the deadline for potential benefit cuts.

However, Washington will almost certainly reform the program in the next few years. It's possible that a switch to the CPI-E could happen at this time, but for now, we can't be sure.

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