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The Social Security Cost-of-Living Adjustment (COLA) Forecast for 2026 Was Just Updated. It's Bad News and Worse News [View all]
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The Social Security Cost-of-Living Adjustment (COLA) Forecast for 2026 Was Just Updated. It's Bad News and Worse News for Retirees.
March 18, 2025 — 04:36 am EDT
Written by Trevor Jennewine for The Motley Fool->
Social Security is generally the largest source of income in retirement, but many seniors think benefits have fallen behind inflation. The Motley Fool last year surveyed 2,000 retired workers, and the majority said the cost-of-living adjustments (COLAs) in 2024 and 2025 failed to keep up with rising prices. ... Unfortunately, beneficiaries will likely receive an even smaller raise next year. The Senior Citizens League, a nonpartisan advocacy group, recently revised its 2026 COLA forecast down to 2.2%. Retired workers have not received a smaller pay increase since 2021. But there may be worse news in store for beneficiaries.
{snip}
Why the latest COLA forecast is bad news for retirees on Social Security
CPI-W inflation measured 2.7% in February, down from 3% in January. That led The Senior Citizens League (TSCL) to lower its 2026 COLA forecast from 2.3% to 2.2%. But that alone is not a problem because COLAs simply compensate beneficiaries for rising prices. Put differently, the size of the COLA is irrelevant so long as it matches inflation.
The issue lies in the fact that Social Security's COLAs are based on CPI-W inflation. As mentioned, the CPI-W measures price changes based on the spending habits of hourly employees. But working adults are typically younger than retirees on Social Security, and young people spend money differently than seniors. ... Most notably, retired workers typically spend more on housing and medical care, and less on education and transportation. Consequently, the CPI-W misrepresents those spending groups from the perspective of Social Security recipients.
That brings me to the issue with the forecasted 2.2% COLA in 2026: Overall CPI-W inflation fell 0.3 percentage points to 2.7% in February, but housing and medical care prices increased at roughly the same pace as in previous months, and inflation in those groups was above the 2.7% average, as follows:
{snip}
The Social Security Cost-of-Living Adjustment (COLA) Forecast for 2026 Was Just Updated. It's Bad News and Worse News for Retirees.
March 18, 2025 — 04:36 am EDT
Written by Trevor Jennewine for The Motley Fool->
Social Security is generally the largest source of income in retirement, but many seniors think benefits have fallen behind inflation. The Motley Fool last year surveyed 2,000 retired workers, and the majority said the cost-of-living adjustments (COLAs) in 2024 and 2025 failed to keep up with rising prices. ... Unfortunately, beneficiaries will likely receive an even smaller raise next year. The Senior Citizens League, a nonpartisan advocacy group, recently revised its 2026 COLA forecast down to 2.2%. Retired workers have not received a smaller pay increase since 2021. But there may be worse news in store for beneficiaries.
{snip}
Why the latest COLA forecast is bad news for retirees on Social Security
CPI-W inflation measured 2.7% in February, down from 3% in January. That led The Senior Citizens League (TSCL) to lower its 2026 COLA forecast from 2.3% to 2.2%. But that alone is not a problem because COLAs simply compensate beneficiaries for rising prices. Put differently, the size of the COLA is irrelevant so long as it matches inflation.
The issue lies in the fact that Social Security's COLAs are based on CPI-W inflation. As mentioned, the CPI-W measures price changes based on the spending habits of hourly employees. But working adults are typically younger than retirees on Social Security, and young people spend money differently than seniors. ... Most notably, retired workers typically spend more on housing and medical care, and less on education and transportation. Consequently, the CPI-W misrepresents those spending groups from the perspective of Social Security recipients.
That brings me to the issue with the forecasted 2.2% COLA in 2026: Overall CPI-W inflation fell 0.3 percentage points to 2.7% in February, but housing and medical care prices increased at roughly the same pace as in previous months, and inflation in those groups was above the 2.7% average, as follows:
{snip}
https://news.google.com/search?q=social%20security%20cola&hl=en-US&gl=US&ceid=US%3Aen
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