1 Chart That Shows Why Social Security's 2026 Cost-of-Living Adjustment (COLA) Is in Big Trouble
Key Points
Social Security's most-anticipated reveal, the annual cost-of-living adjustment (COLA), is less than two weeks away.
Independent forecasts point to Social Security's 2026 COLA making history -- but there's a catch.
A sour note will likely be cast over this year's COLA announcement because of a rapidly rising expense.
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The biggest day of the year for Social Security's more than 70 million traditional beneficiaries is almost here.
On Wednesday, Oct. 15, the U.S. Bureau of Labor Statistics is slated to report inflation data from the month of September, which is the final puzzle piece needed to calculate Social Security's 2026 cost-of-living adjustment (COLA). In other words, beneficiaries are just 12 days away from knowing precisely how much they'll be receiving on a monthly basis next year.
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While this tends to be an exciting event -- who doesn't enjoy receiving a larger nominal payout on a near-annual basis? -- there's likely to be a sour note cast over this year's "raise."
Image source: Getty Images.
Here's why Social Security's COLA reveal is such an important event
Before digging into the potential disappointment that awaits retirees, it's imperative to lay the foundation of why Social Security's cost-of-living adjustment is so important.
The program's COLA is the mechanism that allows the Social Security Administration to offset the effects of rising prices (inflation). If COLAs didn't exist, the rising cost of goods and services would, over time, devalue the purchasing power of Social Security income.
In the 35-year period following the first issued retired-worker benefit check in January 1940, there wasn't a set formula for passing along these adjustments. In fact, beneficiaries went an entire decade (the 1940s) without a single raise. Between 1950 and 1974, special sessions of Congress passed along 11 increases to benefits, including the largest-ever monthly payout bump of 77% in 1950.
The near-annual increases we're familiar with today began in 1975, which is when the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was tethered as Social Security's inflationary measure. This is an index with more than 200 spending categories that's reported monthly by the BLS and can provide quick year-to-year comparisons to determine if prices are, collectively, rising (inflation) or dropping (deflation).
The reason Social Security beneficiaries have to wait till mid-October to find out how much they'll receive each month in the upcoming year is because CPI-W readings from the third quarter (July, August, and September) are used to calculate Social Security's COLA. If the average CPI-W reading in the current year is higher than the comparable reading from the previous year, beneficiaries are due a raise.
The year-over-year percentage increase in the average third-quarter CPI-W reading, rounded to the nearest tenth of a percent, equals the COLA beneficiaries receive. It's a straightforward calculation.
Image source: Getty Images.
Independent estimates point to a record-breaking cost-of-living adjustment -- but there's a catch
Over the previous four years, beneficiaries have enjoyed a decisive uptick in annual COLAs, relative to the anemic increases (or lack thereof) passed along throughout the 2010s. From 2022 through 2025, Social Security checks rose by 5.9%, 8.7%, 3.2%, and 2.5%, respectively. The 8.7% increase in 2023 was the largest on a percentage basis in 41 years.
With the average cost-of-living adjustment over the last 16 years clocking in at 2.3%, beneficiaries are hoping for a fifth straight year with an above-average raise -- and they'll likely get it.
According to nonpartisan senior advocacy group The Senior Citizens League (TSCL), Social Security's COLA is forecast to come in at 2.7% in 2026. Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson, who retired from TSCL last year, projects a 2.8% cost-of-living adjustment in the new year.
If either of these estimates hits the mark, it would be the first time since 1997 that five consecutive COLAs have met or surpassed 2.5%. That's an enjoyable bit of history for retired workers, workers with disabilities, and survivor beneficiaries following multiple years of anemic COLAs.
But it's one thing to talk percentages and an entirely different beast to examine what these percentages mean in real dollars. Based on the average monthly payout to retired-worker beneficiaries of $2,008.31 in August, a 2.7% or 2.8% COLA would lift monthly income by $54 to $56 in 2026.
As for the average worker with disabilities and survivor of deceased workers, monthly benefits would climb by approximately $43 to $44 next year, respectively, based on independent COLA estimates of 2.7% or 2.8%.
Social Security's COLA is going to be partially or fully gobbled up by this expense in 2026
While a first-in-this-century COLA increase in 2026 sounds great on paper, Social Security's COLA is actually in big trouble.
CHART OF THE WEEK: The $21.60 increase in the monthly #Medicare Part B premium for 2022 is the largest dollar increase since the start of the program.
-- KFF (@KFF) January 12, 2022
In percentage terms, the premium has risen faster only on three other occasions in the last 20 years. https://t.co/4o9ddTercY pic.twitter.com/mYr5Rq5YWp
The chart you see above, which has been posted on social media platform X (formerly Twitter) by nonpartisan health policy research organization KFF, details the growth of Medicare Part B monthly premiums from 2002 to 2022. To fill in the blanks, 2023 saw a 3% decline in Part B, while 2024 and 2025 saw the Part B premium rise by 5.9% both years.
Part B is the segment of Medicare that handles outpatient services. For Social Security beneficiaries aged 65 and above who are enrolled in traditional Medicare, their Part B premium is almost always automatically deducted from their monthly Social Security benefit.
Here's the dilemma: the Medicare Trustees Report filed earlier this year forecast a huge uptick in the Part B premium in 2026 of 11.5% to $206.20/month. It would mark the seventh-largest percentage increase in Part B since 2002, as well as the eighth time overall that dual enrollees have endured a double-digit year-over-year percentage increase in Part B. On a nominal-dollar basis, it would be one of the largest increases ever.
On an average annual basis, Medicare's Part B premium has risen by 6.37% since 2002, if we make the assumption that the Trustees are correct with their 11.5% forecasted hike for 2026. In comparison, Social Security's COLA over the same timeline, including a 2.75% midpoint estimate for 2026, has climbed by an annual average of just 2.66%!
For dually enrolled retirees, it's a virtual certainty that Medicare's Part B premium is going to gobble up some or all of their projected COLA in the upcoming year. This is especially true for lifetime low-earners who rely on Social Security as their primary source of income.
It also speaks to the broader issue of costs that matter most to aging beneficiaries -- shelter and medical care services -- consistently rising a faster pace than the COLAs they're receiving. This is a recipe for a persistent loss of purchasing power that doesn't look as if it'll improve in 2026.
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