The Cost of Living Adjustment (COLA) is crucial for millions of Social Security recipients in the U.S., including retirees, disabled workers, and survivors of deceased workers. COLA helps beneficiaries maintain their purchasing power as inflation drives up prices. With inflation reports now available, new projections for the 2026 COLA are becoming clearer. A recent estimate suggests a slight increase in the payment adjustment, providing some relief for beneficiaries next year.
What’s New About the 2026 COLA Estimate?
The latest July estimate points to a possible 2.7% increase in Social Security payments for 2026, up from last month’s 2.5% forecast. While the increase is modest, it reflects an ongoing effort to keep up with rising living costs. The final COLA figure, however, will depend largely on inflation data collected from July through September, which will be used by the Social Security Administration (SSA) to calculate the adjustment.
How COLA is Calculated
The SSA calculates COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index tracks inflation based on the prices of goods and services typically bought by wage earners. The COLA calculation is a formula designed to help beneficiaries maintain their standard of living despite price increases, but the rate varies each year based on the latest inflation trends.
Who Benefits from Social Security COLA?
The COLA affects approximately 74.2 million people in the U.S. who rely on Social Security benefits. These include:
Retired Workers: Seniors who rely on Social Security for their retirement income.
Disabled Workers: Individuals who are unable to work due to disability and rely on Social Security Disability Insurance (SSDI).
Survivors of Deceased Workers: Widows, widowers, and dependent children who receive survivor benefits.
Supplemental Security Income (SSI) Recipients: Those who receive SSI, typically for financial assistance due to low income and limited resources.
The Relationship Between COLA and Medicare Part B Premiums
Although COLA is meant to help beneficiaries keep up with rising living costs, many feel it doesn’t go far enough. A key factor in this concern is the rising cost of Medicare premiums, particularly Part B premiums, which cover outpatient services. Medicare premiums have been increasing at a much faster rate than the COLA increases.
Mary Johnson, a Social Security and Medicare policy analyst, notes that “It’s not uncommon for Part B premiums to eat up much or even all of the annual COLA, leaving little extra to cover other large cost increases.” As a result, many beneficiaries find that the COLA barely covers the additional healthcare costs they face, making it harder to stretch their benefits to meet all their needs.
The anticipated 2.7% COLA increase for 2026 is a positive sign for Social Security recipients, but many beneficiaries remain concerned about the rising costs of healthcare and other living expenses. The final COLA figure, which will be determined later in the year, may provide some relief, but it’s unlikely to fully offset the impacts of inflation and rising healthcare costs. Beneficiaries will need to continue relying on careful financial planning and possibly seeking additional assistance to maintain their quality of life.
