2026's Social Security COLA Will Be Bad News No Matter What. The Sooner You Accept That, the Better

Source Motley_fool

Key Points

  • Many seniors are eager to find out what their upcoming cost-of-living adjustment (COLA) will be.

  • There's a major problem with the way Social Security COLAs are calculated.

  • Your best bet may be to assume that your COLA won't go very far, and to take other steps to make up for that.

  • The $23,760 Social Security bonus most retirees completely overlook ›

There's one piece of news seniors on Social Security have been itching to get for months now -- news of an official cost-of-living adjustment, or COLA, for 2026.

At this point, it's pretty clear that 2026 is not going to be one of those 0% COLA years. Though there have been 0% COLAs in the past, inflation has risen enough to date that experts can say with confidence that Social Security benefits will, indeed, be going up in the new year. The question is by how much.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A person at a laptop, holding papers.

Image source: Getty Images.

Current estimates seem to be floating in the 2.7% to 2.8% range. But we won't know what next year's COLA is for sure until the Social Security Administration makes its big announcement.

That said, Social Security's upcoming COLA is probably going to be bad news no matter what it actually amounts to. It's important to understand why -- and take steps to work around that.

Why Social Security's upcoming COLA probably won't cut it

There's a reason not to get too excited about Social Security's 2026 COLA. That reason boils down to the fact that Social Security COLAs have been failing seniors for decades.

In fact, the Senior Citizens League, an advocacy group, says that seniors on Social Security lost 20% of their buying power between 2010 and 2024 due to insufficient COLAs. So chances are, next year's COLA won't keep up with inflation, either.

The problem stems from how Social Security COLAs are calculated. They're based on annual third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Now, let's look at that index's name carefully. Notice the terms "urban," "wage earners," and "clerical workers." Do those describe the typical Social Security recipient?

It's true that plenty of retirees reside in cities. But that's certainly not a given. In fact, many retirees are able to move outside of cities to lower their costs once they no longer have to worry about proximity to a job.

Many Social Security recipients, by nature, are also not workers. They're retired. So it's pretty silly to base Social Security COLAs on an index that measures the costs a different subset of people face.

Advocates have been pushing to base Social Security COLAs on the Consumer Price Index for the Elderly, or CPI-E. But lawmakers haven't exactly been jumping to make that change, so it's not one to expect anytime soon.

Prepare to be disappointed now

No matter what raise Social Security recipients end up eligible for in 2026, chances are, it won't cut it. Plus, if you're on Medicare as well, any increase in the cost of Part B will eat away at your COLA.

If you want to improve your financial picture for 2026, you can't sit back and wait for your COLA to take effect for that to happen. Instead, you should take matters into your own hands.

Here are some specific steps to take:

  • Do a thorough review of your retirement budget
  • Identify a few expenses you can reduce or even eliminate
  • Explore options for going back to work, whether as an hourly employee or a gig worker
  • See if it's possible to downsize your home or rent out a room for income
  • Explore moving in with a family member if money is very tight
  • Review your Medicare plan choices carefully during open enrollment to lower your healthcare costs

There may be other steps you can take to improve your finances, too, and it's worth exploring them. What you don't want to do is assume that your Social Security COLA will be the solution to your financial problems.

Even if Social Security's 2026 COLA is more generous than expected, chances are good that it won't do the job of keeping up with inflation that it's supposed to. The sooner you're able to accept that, the sooner you can start making positive changes that have a real effect.

The $23,760 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Hedera Price Analysis: HBAR defies $50B market dip as Nvidia confirms AI partnershipHedera maintains strength above $0.15, signaling investor confidence as NVIDIA’s AI integration boosts long-term bullish sentiment and breakout potential.
Author  FXStreet
Apr 09, Wed
Hedera maintains strength above $0.15, signaling investor confidence as NVIDIA’s AI integration boosts long-term bullish sentiment and breakout potential.
placeholder
OpenAI Introduces Lowest-Cost ChatGPT Subscription in India with UPI Payment OptionOn Tuesday, OpenAI introduced ChatGPT Go, its most affordable AI subscription tier, targeting the price-sensitive Indian market. Nick Turley, OpenAI’s Vice President and Head of ChatGPT, announced the launch via an X post, highlighting that users can pay through India’s Unified Payments Interface (UPI).
Author  Mitrade
Aug 19, Tue
On Tuesday, OpenAI introduced ChatGPT Go, its most affordable AI subscription tier, targeting the price-sensitive Indian market. Nick Turley, OpenAI’s Vice President and Head of ChatGPT, announced the launch via an X post, highlighting that users can pay through India’s Unified Payments Interface (UPI).
placeholder
ANZ Raises Gold Price Forecast to $3,800/Oz, Predicts Rally to Continue Through 2026Gold is expected to continue its upward momentum throughout 2025 and into early 2026, driven by ongoing geopolitical tensions, macroeconomic challenges, and market anticipation of U.S. monetary easing, according to analysts from ANZ in a research note released Wednesday.
Author  Mitrade
Sept 10, Wed
Gold is expected to continue its upward momentum throughout 2025 and into early 2026, driven by ongoing geopolitical tensions, macroeconomic challenges, and market anticipation of U.S. monetary easing, according to analysts from ANZ in a research note released Wednesday.
placeholder
Dollar Gains as US-China Trade Tensions Ease The U.S. dollar remained steady on Tuesday following a shift in President Donald Trump’s harsh stance on tariffs against China.
Author  Mitrade
Yesterday 01: 38
The U.S. dollar remained steady on Tuesday following a shift in President Donald Trump’s harsh stance on tariffs against China.
placeholder
Samsung Electronics Forecasts Stronger-Than-Expected Q3 Profit on AI Demand Samsung forecasts Q3 profit of 12.1 trillion won, boosted by strong AI chip demand.
Author  Mitrade
Yesterday 01: 43
Samsung forecasts Q3 profit of 12.1 trillion won, boosted by strong AI chip demand.
goTop
quote