The Dreaded Lose-Lose Scenario Has Become a Reality Following the Release of Social Security's 2026 Cost-of-Living Adjustment (COLA)

The wait is finally over for Social Security's more than 70 million traditional beneficiaries.

On Friday, Oct. 24, nine days later than initially scheduled because of delays tied to the federal government shutdown, the U.S. Bureau of Labor Statistics (BLS) released the September inflation report and provided the final data point needed to calculate and announce Social Security's cost-of-living adjustment (COLA) for 2026.

Social Security's COLA is the near-annual "raise" passed along to beneficiaries that accounts for the inflationary pressures they've faced. In simpler terms, if a large basket of goods and services that are regularly purchased by Social Security recipients increases in price from one year to the next, Social Security benefits would also need to climb to avoid a loss of purchasing power. The cost-of-living adjustment is the tool that helps recipients combat inflation.

Although this long-awaited COLA announcement was accompanied by a bit of history and aided by a "Trump bump," it exposed the dreaded lose-lose scenario that retired workers had feared.

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Social Security's cost-of-living adjustment hasn't done this since 1997

On Oct. 24, the Social Security Administration (SSA) announced that a 2.8% cost-of-living adjustment would take effect in 2026. For context, this is modestly higher than the 2.3% average raise that's been passed along since 2010.

But it's one thing for beneficiaries to see a percentage on paper and an entirely different beast to understand how much extra cash that might lead to on a monthly basis.

Based on the latest available monthly statistical snapshot from the SSA in August, a 2.8% COLA will lift the average check for retired-worker beneficiaries by $56/month in 2026 to almost $2,065. On an annualized basis, the average retired worker is projected to bring home about $24,775 from Social Security next year.

As for the typical worker with disabilities and survivor beneficiary, their monthly payouts will climb by approximately $44 each, respectively, to $1,627 and $1,619.

This above-average COLA, relative to increases since 2010, was lifted in part by President Donald Trump's tariff and trade policy. The Trump administration's use of input tariffs (duties placed on goods used to complete the manufacture of a product domestically) has modestly increased the U.S. inflation rate, which in turn bumped up the COLA beneficiaries are set to receive next year.

Furthermore, this marks the fifth consecutive year that Social Security beneficiaries have had their payouts climb by at least 2.5%. The last time benefits grew by at least 2.5% for a half-decade was the 10-year stretch from 1988 through 1997, when COLAs clocked in between 2.6% and 5.4% on an annual basis.

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The lose-lose scenario is fully in play for retirees in 2026

While announcements that point to beefier payouts in the upcoming year are something Social Security beneficiaries will always welcome, the COLAs retirees have been receiving have, more often than not, come up short.

The fear of a dreaded lose-lose scenario existed prior to the cost-of-living adjustment being announced on Oct. 24. Following the COLA reveal, it's been all but confirmed.

Social Security's annual COLA should be helping program recipients mirror the inflationary pressures they're dealing with -- but this rarely proves to be the case. The problem is the inflation-measuring tool used by the SSA to calculate COLAs, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), is inherently flawed.

As its full name shows, it's an index that tracks the pricing pressures "urban wage earners and clerical workers" are facing. These are predominantly working-age folks who aren't currently receiving a Social Security retired-worker benefit. Meanwhile, 87% of Social Security recipients were age 62 or above, as of December 2024.

Urban wage earners and clerical workers don't spend their money the same way as retirees. The aged beneficiaries Social Security is designed to provide a financial foundation for spend a higher percentage of their budget on shelter and medical care services than the typical working-age person. September inflation data revealed a trailing-12-month (TTM) inflation rate for shelter and medical care services of 3.5% and 3.9%, respectively. As long as the TTM inflation rate for these two important expenses remains higher than the COLAs retirees are receiving, the buying power of their Social Security income is almost assured to decline.

That's one loss for 2026.

The other reason COLAs came up short is because of the projected increase in the Medicare Part B premium next year. Part B is the segment of Medicare responsible for outpatient services, and its monthly premium is almost always automatically deducted from the Social Security benefit of retired workers enrolled in traditional Medicare.

In mid-June, the 2025 Medicare Trustees Report forecast an 11.5% increase for Part B in 2026, which would lift the monthly premium from $185 to $206.20. Even with a little bit of wiggle room to this estimate, aged beneficiaries are going to see some or all of their 2.8% Social Security COLA offset by the eighth double-digit percentage increase in Part B premiums over the last quarter century.

That's loss No. 2.

While Social Security checks are set to climb in a little over two months, aged beneficiaries will probably be worse for the wear when they do.

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