The first Social Security checks reflecting 2025’s 2.5% cost-of-living adjustment (COLA) have been distributed, bringing the average retired worker’s monthly benefit to $1,976, up from $1,927 in 2024. While this increase offers some financial relief, many retirees were hoping for a higher boost to keep up with rising costs.
Looking ahead, many are already speculating about the 2026 COLA, but early predictions suggest a modest adjustment similar to 2025’s increase.
COLA
The 2026 COLA will be officially announced in October, based on third-quarter inflation data from 2024 and 2025. Current estimates from the Senior Citizens League (TSCL) and the Congressional Budget Office (CBO) suggest that it may once again land at 2.5%.
If this holds true, the average benefit of $1,976 could rise to approximately $2,025 per month. While these figures may vary slightly as new beneficiaries with higher average earnings enter the system, the overall increase will likely remain modest unless inflation unexpectedly accelerates.
Inflation
COLAs surged during the pandemic due to high inflation but have since moderated as inflation slowed. Retirees who were hoping for a larger boost in 2026 may find themselves disappointed. According to TSCL, Social Security benefits have lost 20% of their buying power since 2010, highlighting the need for more robust inflation protection.
Advocates have called for reforms, including using the Consumer Price Index for the Elderly (CPI-E) to calculate COLAs instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This shift could result in higher COLAs, as CPI-E reflects the spending habits of older Americans more accurately. Some have also proposed a minimum 3% COLA floor.
Challenges
Despite calls for reform, Social Security faces a funding shortfall that complicates the issue. Without intervention, the program’s trust funds could be depleted within the next decade, leading to benefit cuts of around 20%. While payroll taxes will still fund 80% of benefits, significant changes to COLAs are unlikely until a long-term funding solution is implemented.
Retirees
For now, retirees must rely on their personal savings or other sources of income to supplement their Social Security benefits. Here are some options:
- Savings and Investments: Tap into your retirement savings to bridge the gap between benefits and expenses.
- Part-Time Work: A part-time job can provide additional income and keep you engaged.
- Other Benefits: Look into government assistance programs to help cover healthcare, housing, or food expenses.
Benefits
If you’re behind on retirement savings, there are strategies to boost your Social Security income. For instance, delaying benefits until age 70 can significantly increase your monthly payments. Additionally, coordinating benefits with your spouse and avoiding early withdrawals can maximize your total lifetime benefit.
With a combination of smart planning and supplemental income, you can better prepare for the future, even in the face of modest COLA adjustments.
FAQs
What is the 2025 COLA increase?
The 2025 COLA is 2.5%, raising the average benefit to $1,976 monthly.
When will the 2026 COLA be announced?
The 2026 COLA will be announced in October 2025.
What factors determine the COLA?
COLA is based on third-quarter inflation data from the current and previous year.
How much could the 2026 COLA increase benefits?
A 2.5% COLA could raise the average benefit to $2,025 monthly.
What can retirees do to supplement their income?
Retirees can use savings, part-time work, or government programs to supplement income.
