New Bill Could Make 2026 Social Security COLA Even Bigger

On Oct. 24, the Social Security Administration announced that Social Security benefits recipients would receive a 2.8% benefits increase in 2026. This benefit increase is occurring due to a Social Security cost-of-living adjustment (COLA) that occurs in most years.

COLAs are a critical part of the Social Security benefits program. Many seniors collect benefits for decades. During that time, inflation causes prices to increase. If benefits did not also increase, checks would buy less for retirees every year.

Unfortunately, there is reason to believe that benefits are not increasing enough, and the new 2.8% COLA will not be sufficient to address this issue on its own. Because seniors are falling short in keeping up with rising prices, some lawmakers have introduced new legislation that would increase the monthly benefits seniors collect by $200 for a six-month period.

Here are some details about the proposal, why lawmakers believe it is necessary, and what the chances are of the increase occurring.

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Lawmakers want to add $200 to monthly Social Security benefits

The proposed new law is called the Social Security Emergency Inflation Relief Act.

According to Sen. Elizabeth Warren, who proposed the bill along with several other Democrats, the legislation would increase Social Security benefits on an emergency basis by $200 per month until July 2026.

The benefits increase would be available to everyone collecting Social Security payments, including Supplemental Security Income (SSI) beneficiaries. It would also apply to railroad retirement benefits, veteran disability compensation, and veteran pension benefit annuities.

Lawmakers believe this added bonus is necessary because the current Social Security benefits increase scheduled to occur next year will only provide the average retiree with around $56 extra per month. With the impact of tariffs and continued rising prices, this may not be enough -- especially given that Medicare premiums are expected to increase significantly and consume a substantial portion of the Social Security benefits increase.

Do Social Security retirees need more money to keep up with inflation?

There is undoubtedly a good reason to believe that retirees require additional support in coping with rising costs.

The Senior Citizens League (TSCL) has conducted research into whether COLAs are sufficient to maintain the value of benefits, and has found that they fall short in most years. As a result, retirees have lost a significant amount of buying power since 2010.

Unfortunately, according to TSCL, the average benefit today is worth only around $0.80 on the dollar compared to the buying power that benefits provided in 2010. This means that problems with the COLA existed long before tariffs were introduced.

The problem is that the formula used to calculate COLAs is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Because of the fact the spending habits of this group don't match the spending habits of retirees, COLAs have fallen short in most years.

Retirees have had to take more money from retirement plans or live on less, as they have seen inflation surge in key areas, including healthcare and housing. CPI-W doesn't accurately reflect the percentage of income that retirees devote to these expenses.

A $200 bonus for six months might provide some relief to seniors, but ultimately, the COLA formula would need to be fixed in order for retirees to find meaningful relief. With COLAs that constantly cause the value of benefits to decline, retirees may be left taking more out of their 401(k) and IRA each year -- and this could mean draining these accounts too quickly. An extra $200 for a few months won't solve that.

Some experts have recommended shifting to the CPI-E, an experimental Consumer Price Index specifically designed for the elderly. While this approach may seem sensible, there are obstacles, including the experimental nature of this index and the fact that Social Security is already facing financial difficulties, so a de facto benefits increase would exacerbate that problem.

Unfortunately, the reality is that this bill, which would give seniors an extra $200, probably won't pass, given that it has been proposed by Democrats and Republicans are in power in Washington. A change to the CPI formula is unlikely to occur anytime soon, either.

This means that when planning for retirement in the upcoming year, seniors should be aware that their benefits may lose value again and adjust their spending accordingly.

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