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According to the Social Security Administration, a 2.8% Social Security cost-of-living adjustment will go into effect in 2026, increasing retirement benefits by an average of $56 per month. The gradual adjustment reignites a long-standing debate over how COLAs are calculated, as many older Americans struggle to keep up with rising prices.
The latest cost of living adjustments are about average. The 2026 adjustment ranks 29th out of 51 COLAs enacted since 1975, according to The Senior Citizens League.
However, a recent survey by a nonpartisan senior citizen group based on responses from 1,920 adults age 62 and older found that only 10% of seniors are satisfied with their annual COLA.
COLA is evaluated annually to ensure that benefits for approximately 75 million Americans keep pace with rising costs. Changes to the underlying data used in the calculations could affect the amount beneficiaries receive and could also affect Social Security’s increasingly depleted trust fund.
The Social Security cost of living adjustment is calculated based on a portion of the Consumer Price Index, formally known as the Consumer Price Index for Urban Wage and Office Workers (CPI-W).
“The CPI-W is a measure that has always been used,” said Emerson Sprick, director of retirement and labor policy at the Bipartisan Policy Center.
Following the announcement of the 2026 COLA, some Democratic lawmakers in Washington proposed legislation to change the index used for the COLA to the Consumer Price Index for the Elderly (CPI-E). Some argue that the CPI-E better reflects spending by seniors. Another group of Washington Democrats is proposing increasing benefits by $200 a month for six months in 2026 to help beneficiaries cope with rising consumer prices.
“We want CPI-E or 3%, whichever is higher,” said Shannon Benton, executive director of the Alliance on Seniors, referring to the group’s long-running campaign for a more generous COLA.
Social security inspection based on various measures
However, the data suggests that switching to another COLA measure may not lead to the significant increase in benefits that retirees and other beneficiaries expect.
Based on the current COLA formula, a person who claimed $1,000 per month in benefits in 2005 would now receive $1,601, according to Sprick’s calculations.
According to Sprick, if COLA had been indexed to CPI-E over that period, its return would now be $1,622, or just 1% higher.
Chained CPI, another commonly suggested metric for COLA, currently yields a return of $1,555, 3% less than the current formula, Sprick’s calculations found.
Similarly, a 2024 calculation by Alicia Munnell, senior advisor at Boston University’s Retirement Research Center, found that the average annual increase in CPI-W from 2000 to 2023 was 2.5%, based on CPI data from the Bureau of Labor Statistics. Munnell said CPI-E pushed the average annual rate of increase at the time to 2.6%, while cascading the CPI would have boosted benefits by an average of 2.2%.
“It all depends on when you retire,” said independent Social Security and Medicare analyst Mary Johnson, one of the proponents of switching to CPI-E.
“It would have made a huge difference in a few years,” Johnson said. “Other years, there aren’t as many.”
But given a 20- to 25-year retirement period, indexing COLA to CPI-E would result in a slight increase in benefits, which would grow over time, she said.
Calculating COLA with other indexes
The current measure used to calculate the COLA, the CPI-W, measures changes in the prices of a basket of goods and services consumed by urban wage earners and office workers.
It is a subset of the broader CPI index, Consumer Price Index for All Urban Consumers (CPI-U), which is used to measure monthly and annual inflation rates. Sprick said the CPI-W and CPI-U indices track each other very closely and produce the same average COLA over time.
According to the Bipartisan Policy Center, the CPI-E weights spending differently than the CPI-W, with health care, housing and recreation spending making up the bulk of the index. Other costs, such as apparel, education, food, and transportation, are given less weight than CPI-W.
Another metric, Chained CPI, shows how consumers adjust their purchasing behavior in response to price changes across categories, such as substituting chicken for beef if the price increases.
Romina Boccia, director of budget and rights policy at the Cato Institute, one of the proponents of the change, said the chained CPI includes a broader swath of the population and is “the most accurate.”
Boccia said the Chained CPI mathematically represents one in eight Americans, while the current index used in COLA, the CPI-W, includes the purchasing behavior of one in three non-elderly Americans.
The chain component of the CPI reflects not only inflation but also its impact on purchasing power, he said.
“What we’re really trying to explain is the purchasing power of Social Security benefits,” Boccia said. “We’re trying to keep fixing it.”
Updating how COLA is measured and, by extension, the benefits people receive, will impact Social Security’s trust fund. The trust fund the program relies on to make retirement payments could be depleted in 2032, according to the Social Security Administration’s latest projections based on changes in the “Big and Beautiful” bill passed by Congress in July.
According to the Bipartisan Policy Center, citing estimates from Social Security’s Chief Accountant, switching to chained CPI would reduce the program’s shortfall by 14%, while switching to CPI-E would increase it by 11%.
Even though Social Security faces long-term funding challenges, 34% of respondents in the Federation for Senior Citizens survey said they wanted the Trump administration and Congress to prioritize better COLAs, and 33% said they wanted to prioritize refinancing the program.
Some experts say other reforms could help
Many of today’s seniors say the current COLA only serves to address higher costs. Johnson, who is retired, said prices for electricity, natural gas and meat are still rising significantly.
“Heaven help you if you get a flat tire or need something done with your car,” Johnson said. Parts alone are expensive these days.
Beneficiaries are also expected to face increased Medicare Part B premiums in 2026. Medicare’s governing board predicts that standard monthly premiums could rise 11.6% to $206.50 a month next year, up from $185 a month in 2025. These premiums are typically deducted directly from your Social Security check, so they will affect how much appears on your COLA recipient’s check.
How much Social Security benefits are provided depends on where retirees live, according to the Older Adult Economic Security Standard Index, developed by the Institute of Gerontology at the University of Massachusetts Boston to measure the income seniors have to pay based on their basic needs and age.
“Cost of living adjustments are important, but too many people, whether individually or with a spouse, are still receiving the maximum benefit they can draw, and the amount remains very low,” said Michelle Putnam, director of the Institute of Gerontology.
According to AARP, Social Security is the primary source of income for 40% of older Americans.
Some experts, including Boccia of the Cato Institute and Sprick of the Bipartisan Policy Center, argue that broader benefits reform is needed to strengthen benefits for people who are struggling.
“Certainly, benefits should be enhanced for some beneficiaries, but not through COLAs,” Sprick said.
Instead, he said, the way benefits are calculated could be changed so that beneficiaries at the lower end of the lifetime income distribution receive full benefits from the time they apply.
