Many older Americans currently depend heavily on Social Security, given that the median retirement savings for individuals aged 65 to 74 is just $200,000 as of 2022, according to the Federal Reserve. This limited amount can be stretched thin over 20 or more years of retirement, leading many with inadequate savings to rely on Social Security for a significant portion of their living expenses.
Seniors reliant on Social Security may find themselves struggling to keep up financially this year due to persistent inflation, which has slightly increased since the announcement of Social Security’s cost-of-living adjustment (COLA) for 2025. In October, it was announced that Social Security benefits would increase by 2.5% in 2025. This modest rise is the smallest in several years, causing discontent among beneficiaries.
An early estimate for the 2026 COLA has been released by the non-partisan Senior Citizens League, suggesting a 2.2% increase. Although this figure may seem low amid continued inflation concerns, it also indicates a potential deceleration in inflation, which could benefit retirees more than a higher COLA could.
The purpose of Social Security COLAs is to help seniors manage expenses as inflation causes prices to rise. These adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). An increase in the CPI-W from one year to the next results in higher Social Security benefits. However, as COLAs rely specifically on third-quarter CPI-W data, next year’s exact Social Security increase cannot yet be determined with certainty. Current figures are only estimates.
If the 2.2% COLA estimate holds true, it could suggest a period of moderate inflation in 2026. A lower COLA could be seen as positive, indicating price stability. However, if inflation persists into 2025, the actual COLA for 2026 could be higher than 2.2%.
Seniors concerned about their financial security should consider proactive measures now, such as returning to work, if feasible, as the economy remains stable. This might involve taking shifts at local retailers or engaging in gig work. Regardless of whether the 2026 COLA turns out to be 2.2% or higher, retirees who primarily rely on Social Security need to plan accordingly to mitigate potential challenges posed by inflation in the upcoming year.
