Bad News: A Double Whammy Awaits Most Social Security Beneficiaries in 2026

Key Points

• The reveal of Social Security's most anticipated announcement, the cost-of-living adjustment (COLA), is roughly one month away.

• Independent estimates suggest Social Security's 2026 COLA will do something that hasn't been observed in almost three decades.

• Two factors are set to adversely impact the purchasing power of Social Security income for most aged beneficiaries in the upcoming year.

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

The most anticipated day of the year is rapidly approaching for the nearly 70 million beneficiaries who took home a traditional Social Security benefit in July.

On Oct. 15, the Social Security Administration (SSA) will reveal what's expected to be a flurry of changes to the program in 2026, including the most prominent of all: the cost-of-living adjustment (COLA). With most retired workers reliant on their monthly check, in some capacity, to meet their expenses, knowing how much they'll receive in the upcoming year is of paramount importance.

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Although Social Security's 2026 COLA is on pace to make history for the first time in nearly three decades, all signs point to most beneficiaries facing something of a double whammy next year.

Image source: Getty Images.

What purpose does Social Security's COLA serve?

The all-important COLA you continue to hear about is a tool at the SSA's disposal that helps beneficiaries fight back against the effects of inflation (rising prices).

Hypothetically, if the collective cost for a broad basket of goods and services regularly purchased by seniors were to rise by 3% from one year to the next, Social Security benefits would also need to increase by the same percentage to avoid a loss of buying power. Social Security's cost-of-living adjustment is the "raise" beneficiaries receive in most years to help counteract the impact of inflation on their purchasing power.

Before 1975, there wasn't an inflationary index or COLA formula that Social Security relied on. Rather, special sessions of Congress would arbitrarily pass along benefit increases with no rhyme or reason. For instance, there wasn't a single benefit adjustment during the 1940s, which was followed by the largest-ever COLA of 77% in 1950.

Beginning in 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) became the program's inflationary yardstick, which allowed for annual COLAs to be passed along, if necessary. It contains north of 200 spending categories, all of which have their own unique percentage weightings. These weightings allow the CPI-W to be whittled down to a single figure each month, which makes for easy year-over-year comparisons to determine whether prices are rising (inflation) or falling (deflation).

Since Social Security's cost-of-living adjustment calculation accounts for only CPI-W readings during the third quarter (July through September), we're roughly a month away from the release of the final puzzle piece needed to calculate the 2026 COLA: the September inflation report.

A rapid expansion of U.S. money supply has provided quite a boost to Social Security COLAs in recent years. US Inflation Rate data by YCharts.

On paper, Social Security's 2026 cost-of-living adjustment should make history

Throughout much of the 2010s, Social Security COLAs were mostly forgettable. The last decade featured three years where no COLA was passed along due to deflation (2010, 2011, and 2016), as well as the smallest positive COLA in the program's history (0.3% in 2017).

But there's been a decisive shift in Social Security COLAs since the COVID-19 pandemic began. A historic increase in U.S. money supply was followed not long thereafter by the highest prevailing rate of inflation in more than four decades. The end result has been four consecutive years of above-average COLAs: 5.9% in 2022, 8.7% in 2023, 3.2% in 2024, and 2.5% in 2025. For context, the average cost-of-living adjustment over the prior 16 years is 2.3%.

Based on multiple independent estimates, the 2026 COLA should make history by reaching or surpassing 2.5% for a fifth consecutive year. The last time beneficiaries received at least a 2.5% payout bump for a half-decade was a 10-year stretch from 1988 through 1997, during which COLAs varied between 2.6% and 5.4% on an annual basis.

Following the release of the August inflation report, nonpartisan senior advocacy group The Senior Citizens League (TSCL) held firm on its 2026 COLA forecast of 2.7%. Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson upped her estimate by a tenth of a percent to 2.8%.

Though these estimates are subject to change, the modest inflationary pressure derived from President Donald Trump's tariff and trade policy is expected to keep the 2026 COLA at or potentially above 2.7%.

If TSCL's estimate proves accurate, the average retired-worker beneficiary would see their monthly payout climb by $54 in 2026. As for workers with disabilities and survivor beneficiaries, the average benefit would increase by approximately $43 per month, respectively.

Image source: Getty Images.

A double whammy awaits many of Social Security's 70 million beneficiaries in 2026

But while things look great on paper, the practical application of Social Security's 2026 COLA is a long way from perfect.

The first problem that aged beneficiaries are going to run into is an expected loss of purchasing power. According to a TSCL analysis released last year, the buying power of a Social Security dollar tumbled by 20% from 2010 to 2024.

The CPI-W does a generally poor job of accounting for the expenses that matter most to seniors. It's an inflationary index tasked with tracking the spending habits of "urban wage earners and clerical workers," who in many instances are working-age Americans not currently receiving a Social Security benefit. These folks spend their money quite differently from the 87% of Social Security recipients who are 62 or older.

On a trailing-12-month basis, based on readings from the Consumer Price Index for All Urban Consumers (CPI-U), which is a similar inflationary measure to the CPI-W, prices for shelter and medical care services have been climbing at a faster pace than the COLA that Social Security beneficiaries are expected to receive. As long as these two critical spending categories sport a higher rate of inflation than Social Security's COLA, there's a very high probability that the purchasing power of Social Security income will decline.

The second part of the double whammy pertains to seniors dually enrolled in Social Security and traditional Medicare. Most of these dual enrollees have their Part B premium, which is the segment of Medicare responsible for outpatient services, automatically deducted from their monthly benefit.

According to estimates in the Medicare Trustees Report, the Part B premium is expected to rise by 11.5% in 2026 to $206.20 per month. This follows more modest increases of 5.9% in back-to-back years. Most aged beneficiaries will see some or all of their 2026 cost-of-living adjustment offset by this sizable jump in the Medicare Part B premium.

Sometimes, history-making moments aren't all they're cracked up to be.

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