Here's Why Your 2026 Social Security COLA May Disappoint You -- Regardless of the Number

Key Points

• Initial projections aren't calling for a very large Social Security cost-of-living adjustment (COLA) in 2026.

• Even if the official COLA comes in higher, seniors may not be happy with it.

• It's best to set yourself up to not be too reliant on Social Security raises each year.

It's hard to believe we're at the midpoint of the year. But alas, we're actually more than halfway through 2025, which means a lot of people are already starting to gear up for 2026. And for seniors on Social Security, now's the time when folks really start to think about what their upcoming cost-of-living adjustment, or COLA, will look like.

The purpose of Social Security COLAs is to help recipients maintain their buying power in the face of inflation. COLAs aren't something lawmakers have to vote in each year. Rather, they're automatic and tied to inflation.

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 »

Image source: Getty Images.

While it's too soon to know what 2026's Social Security COLA will look like, there are estimates available based on the inflation readings we have so far. And the Senior Citizens League, an advocacy group, is predicting that next year's Social Security COLA will amount to 2.5%, which is the same exact raise beneficiaries received at the start of 2025.

To be clear, though, that 2.5% projection could change -- possibly for the worse, but also for the better. But no matter what 2026's Social Security COLA ends up being, there's a good chance you'll be disappointed in it. Here's why.

Social Security COLAs have long failed seniors

Even though the purpose of Social Security COLAs is to help seniors avoid losing buying power, they've historically done a poor job in that regard. The Senior Citizens League says that between 2010 and 2024, Social Security recipients lost 20% of their buying power because their COLAs did not adequately keep pace with inflation as they were supposed to.

Much of the problem stems from how Social Security COLAs are calculated. They're measured based on price changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

However, the typical Social Security recipient is not an urban wage earner or clerical worker. Rather, it's a retiree who may or may not live in an urban area, and whose costs look very different.

Advocates have been trying to push lawmakers to move away from the CPI-W for COLA calculations and instead use a senior-specific index that tracks costs that are more common among retirees. But so far, nothing has changed. As a result, it's likely that no matter what 2026's Social Security COLA comes to, it probably won't give you the buying power you need it to.

Don't be overly reliant on Social Security COLAs

Because Social Security COLAs have a long history of failing seniors, it's best to have retirement income outside of those monthly benefits. If you're already receiving Social Security, it could be that you're retired and that it's a bit late to start building savings for your senior years. But getting a part-time job or joining the gig economy could help you boost your income for more financial flexibility.

If you're still working full-time, you're in an even better position, since you may have an opportunity to build up a sizable retirement nest egg. And even if you're not someone who's likely to retire with $2 or $3 million, even a small nest egg could provide a cushion and make your senior years far less financially stressful.

If you sock away $100 a month in a 401(k) or IRA over 30 years, and your investments grow at a rate of 8% annually, which is a bit below the stock market's average, you could end up with a nest egg worth about $136,000. And while that's not a huge amount of money, using the popular 4% rule, it could give you around $5,400 a year on top of Social Security. That could provide enough of an income boost to make up for COLAs that fall short.

We won't know what 2026's Social Security COLA looks like until October, so it's premature to get your mind set on any given number. But there's a good chance next year's COLA won't cut it for you, no matter what. The more steps you take to secure outside income, the less financial strain you're likely to undergo.

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.