2026's Social Security COLA Is Shaping Up to Be a No-Win Situation for Retirees

Key Points

• Current estimates are calling for a larger Social Security raise in 2026 than in 2025.

• A more generous cost-of-living adjustment (COLA) means inflation has picked up.

• What Social Security recipients gain in one regard, they lose in another.

• The $23,760 Social Security bonus most retirees completely overlook ›

There are millions of retired seniors today who collect a monthly benefit from Social Security. And many Social Security recipients are hoping that 2026's cost-of-living adjustment (COLA) will be more generous than the 2.5% raise seniors were granted at the start of 2025.

The purpose of Social Security COLAs is to help ensure that benefits are able to keep up with inflation from year to year. Many people collect Social Security for decades. Without the automatic COLAs benefits are eligible for, many seniors would not be able to cover their costs from one year to the next.

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Although the Social Security Administration will not be able to officially announce a 2026 COLA until October, initial estimates are calling for a larger Social Security raise in 2026 than 2.5%. But that's not necessarily a good thing, even though seniors might think it is.

Why seniors lose out with 2026's Social Security COLA either way

Social Security COLAs are designed to keep pace with inflation. So when there's a larger COLA from one year to the next, it means that inflation has picked up.

Such may be the case in 2026. The Senior Citizens League, an advocacy group, is projecting a 2.7% COLA for 2026, based on recent inflation data. But if that larger raise comes to be, it will come at the cost of higher inflation.

As it is, many people are worried about living costs rising as tariff policies take hold. And any price increases that come down the pike during the tail end of 2025 will be on top of price increases consumers are already being forced to cover.

If Social Security ends up with a 2.7% COLA or higher in 2026, it will mean that inflation is trending in the wrong direction. So what retirees gain in the form of a larger COLA, they're going to lose in the form of higher costs across the board, making next year's COLA a true no-win situation.

You can't bank on Social Security COLAs during retirement

A lot of seniors today are dependent on not just Social Security itself, but decent COLAs to stay afloat financially. If you're still working, it's best to make sure that does not end up being the case for you.

If you end up very reliant on Social Security COLAs in retirement, you risk struggling financially -- because if those COLAs are larger, it will mean that inflation is more rampant.

A better bet? Save well for retirement so that your Social Security COLAs mean less.

Fund an IRA as soon as you start collecting a steady paycheck, or sign up for your workplace 401(k) plan once that becomes an option for you. From there, contribute to a retirement plan steadily, and invest your money wisely so it grows over time.

No matter what 2026's Social Security COLA amounts to, it's probably not going to do the job seniors want it to. If you want to avoid financial stress in retirement, make sure you're never too reliant on COLAs by saving well and setting yourself up with a robust income stream outside Social Security.

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