The 2026 COLA Could Disappoint Social Security Retirees

Retirees on a fixed income often need every dollar they can get to cover their costs. That's one reason why so many seniors are eager to find out how much their Social Security benefits will increase each year.

Social Security benefit payments go up in most years because they must do so to keep pace with rising prices. Since the cost of goods and services increases over time, retirees would quickly face financial trouble if their benefit checks didn't increase, too.

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Unfortunately, while seniors can expect to see a benefits increase in 2026, it is almost assuredly going to be a disappointing one. Here's why retirees on Social Security may be mad when they see their checks next year -- and also why they shouldn't be overly concerned.

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Retirees are not going to like next year's Social Security raise

Retirees are almost sure to be disappointed in their Social Security raise in 2026 because it won't be a very big one relative to the amount that benefits have risen in recent years. In fact, here's what COLAs have looked like lately:

• 2020: 1.6%
• 2021: 1.3%
• 2022: 5.9%
• 2023: 8.7%
• 2024: 3.2%
• 2025: 2.5%

Since the pandemic ended, retirees have seen some of the highest COLAs in years. Anyone who retired in the last couple of years may expect that this is the norm, and even longtime retirees have likely grown accustomed to getting big benefit increases.

That's changing next year, though. While we won't know the exact cost-of-living adjustment until all the numbers from the third quarter are in, it's possible to make projections based on current changes so far this year to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That's the price index used to set COLAs, as the annual benefits increase is based on year-over-year price changes as measured by the CPI-W.

In mid-May, the Senior Citizens League used CPI-W data to project what the COLA will look like next year. According to this senior advocacy group, the estimate for the 2026 COLA is 2.4%. This is a slight increase from the prediction last month, which was 2.3%. If this number holds and retirees get just a 2.3% or 2.4% raise, it will be the lowest since 2021.

Of course, this is not yet the official announcement, and things could change. But all evidence suggests that retirees will not see their Social Security checks go up very much next year at all -- and this is probably going to disappoint many who were counting on a bigger payment being deposited when 2026 rolls around.

A low benefits increase may not be a cause for disappointment

While it's understandable that seniors would be upset about seeing only a small increase in their Social Security payments, when you look at the big picture, this may not be such a bad thing. See, COLAs are directly based on inflation, so the raises were high in the past few years because inflation was surging.

In general, retirees tend not to benefit from periods of high inflation. In fact, it typically hurts them because their savings may lose ground, and many have conservative investment portfolios that struggle to beat high rates of inflation, as retirees can't afford to take too many risks with money they're relying on for support.

So, since a smaller COLA means that inflation isn't as big of an issue, retirees could end up better off in the end, as their savings stop losing buying power so fast -- even if it does mean their Social Security benefits increase is smaller. Retirees should start preparing for the reality of a smaller COLA sooner rather than later, before that first check of 2026 hits their account and they find themselves facing an unpleasant surprise.

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