Seniors Anticipate a Superior Social Security Inflation Increase in 2026, Yet Remain Cautious About Premature Exultation
In the United States, Social Security benefits are a crucial source of income for many seniors, with 39% of men and 44% of women over the age of 65 receiving at least half of their income from the government program. However, a potential above-average Cost-of-Living Adjustment (COLA) in 2026 could mean another tough year for retirees, particularly those relying heavily on their monthly Social Security benefit.
The government calculates the COLA each year using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Developed by the Bureau of Labor Statistics (BLS), the CPI-W surveys thousands of businesses and households across the country. However, some experts argue that the CPI-W may not be a great measure of the actual increase in costs for most senior households due to differences in spending patterns.
Seniors may spend less on commuting or clothing and have much higher medical bills compared to when they were working. These differences are not adequately reflected in the CPI-W, which could lead to a discrepancy between the annual COLA and the real inflation experienced by seniors.
As of July, the CPI-W number was 2.5%. If this trend continues, seniors may face another year of diminishing buying power in 2026 if the above-average COLA does not align with the real inflation seniors experience.
Since 2010, someone who started Social Security has seen their benefits lose 20% of their purchasing power due to this discrepancy, according to a study by The Senior Citizens League. The organisation argues that seniors do best with slow and steady inflation, as volatile pricing can lead to CPI numbers that don't reflect the real costs seniors face.
The Social Security Administration (SSA) is responsible for calculating the annual COLA for Social Security payments in the USA. More than 58 million seniors collect Social Security retirement or survivor benefits each month, making it a vital safety net for many Americans.
Some experts predict that the 2026 COLA could be 2.7% due to muted month-over-month growth last summer, higher-than-expected inflation in wholesale pricing, and potential higher consumer pricing over the next two months. However, only time will tell if these predictions hold true.
In the meantime, seniors and their advocates continue to call for a more accurate measure of inflation for seniors, one that takes into account their unique spending patterns and the real costs they face. Until then, many seniors will continue to rely on Social Security as a significant source of income, hoping for a COLA that keeps pace with the real inflation they experience.
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