Think Your Next Social Security Raise Will Be Enough? History Says Otherwise.

If you were disappointed in your 2026 Social Security cost-of-living adjustment, or COLA, that's understandable. Earlier this year, benefits rose just 2.8%.

Granted, that boost was higher than the 2.5% COLA that came through the year before. But in 2022, 2023, and 2024, Social Security COLAs came to 5.9%, 8.7%, and 3.2%, respectively. So it's easy to see why this year's 2.8% raise just didn't cut it for many retirees.

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The good news is that current estimates are pointing to a larger Social Security COLA in 2027. But retirees shouldn't necessarily expect that raise to help them maintain their buying power.

The 2027 COLA could disappoint

Current projections are calling for a 2027 Social Security COLA in the 3.4% to 3.6% range. The COLA won't be made official until mid-October, since the Social Security Administration needs to wait on key inflation data from September to run that calculation.

Still, even the low end of that range would be a significant increase over this year's COLA. And many seniors may end up relatively happy with that raise -- at least at first.

But in reality, a 3.4% COLA is likely to fall short. So is a 4.4% COLA or an even larger one, for that matter. In fact, history tells us that pretty much any COLA that comes through in the new year is likely to be a letdown.

Social Security benefits keep losing buying power

The reason next year's COLA is likely to be a disappointment boils down to a flaw in the way those raises are calculated. Social Security COLAs are based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the CPI-W focuses on the spending habits of working people -- not retirees on Social Security.

Due to this mismatch, the Senior Citizens League, an advocacy group, reports that Social Security benefits have lost 13.7% of their buying power over the past 10 years. And the reason is that those annual COLAs have not managed to keep up with real-world inflation.

What this also means is that next year's COLA is likely to let seniors down in the same regard. So if you're banking on a larger raise to improve your financial picture, you may need to come up with a different plan.

That plan could involve moving to an area of the U.S. where your Social Security benefits can go further. It could mean downsizing or getting a part-time job. But either way, you shouldn't expect too much out of next year's COLA, even if the number is significantly higher than the boost your benefits received earlier this year.

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