Social Security’s 2.8% COLA for 2026 raises questions about how increases are calculated

For millions of Americans who depend on Social Security, the upcoming 2.8% COLA in 2026 may sound like good news at first. The increase translates to an average of about $56 more each month for retirees.

However, as everyday prices continue to climb, that modest boost may not stretch as far as many hope. The change has sparked renewed debate among lawmakers, economists, and retirees over whether the formula behind the COLA is truly keeping up with real living costs—or if it’s time for something new.

Why the 2.8% increase might not be enough​

While the upcoming adjustment aims to offset inflation, many older Americans say their checks still fall short. Groceries, housing, utilities, and medical bills have continued to rise, leaving seniors with shrinking purchasing power.

A survey from The Senior Citizens League found that just 10% of older adults are satisfied with annual COLA increases. That frustration reflects a larger issue: the current system may not fully capture what retirees spend the most on, especially healthcare and housing.

How Social Security calculates the COLA​

Each year’s adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This measure tracks prices for a typical working household, not necessarily retirees, which critics say leads to underestimating seniors’ cost pressures.

Policy experts and lawmakers have suggested switching to other inflation measures, such as the Consumer Price Index for the Elderly (CPI-E), which gives more weight to expenses that tend to impact older adults the most. Some also propose the “chained CPI,” which accounts for changes in consumer behavior when prices rise, such as choosing lower-cost alternatives.

What would change if another formula were used?​

Switching the calculation method sounds simple, but the financial effects vary. Analysts found that if the CPI-E had been used since 2005, the average Social Security check today would be roughly 1% higher. Using the chained CPI, however, would result in benefits about 3% lower than they are now.

Over two decades, the CPI-W’s average annual increase has been 2.5%, compared with 2.6% under CPI-E and 2.2% with the chained CPI. Even small yearly differences can add up over time, potentially impacting thousands of dollars in long-term retirement income.

Also read: Millions set to receive up to $5,100 in Social Security this November—even after the shutdown

The broader impact on seniors’ daily lives​

For many, Social Security is the main source of income. About 40% of older Americans rely on it for most of their household finances, according to AARP. With higher prices for electricity, natural gas, and groceries, every dollar counts.

To make matters harder, Medicare Part B premiums are projected to rise by 11.6% in 2026, reaching $206.50 a month—an increase that will be automatically deducted from many retirees’ Social Security payments.

The future of the program’s finances​

The COLA debate comes as Social Security faces financial strain. Current projections show that the trust fund paying retirement benefits could be depleted by 2032 without reform. A shift to the chained CPI could help extend the fund’s life by reducing the shortfall by 14%, while adopting the CPI-E would increase that shortfall by 11%. It’s a trade-off between maintaining solvency and ensuring benefits better reflect seniors’ living expenses.

What older Americans want Congress to prioritize​

According to The Senior Citizens League, opinions among seniors are nearly evenly split. About 34% want higher COLAs, while 33% believe stabilizing Social Security’s finances should come first. It’s a difficult balance between immediate relief and long-term security, with both sides recognizing the importance of protecting benefits for future retirees.

Also read: Boost your Social Security income in retirement with these three smart strategies

A call for broader reform​

Experts say that improving the COLA formula alone might not be enough. Some suggest updating the calculation of benefits from the start so that retirees with lower lifetime earnings receive greater support. That change, advocates argue, could ensure that the most vulnerable beneficiaries are better protected, even if annual COLA increases remain modest. The goal remains the same: to make Social Security sustainable while keeping up with the true costs retirees face.

Read next:

• "I just wish it would be more”: What seniors are saying about the next Social Security raise
• Some retirees may not get the full 2026 Social Security boost—here’s why
• Will SNAP benefits be refilled sooner than expected? What you need to know about the new emergency payments

Key Takeaways

• Social Security beneficiaries will receive a 2.8% cost-of-living adjustment (COLA) in 2026, increasing the average benefit by approximately $56 per month.
• Many seniors say the increase isn’t enough to keep up with rising living costs, especially as Medicare premiums are set to rise by 11.6%.
• Lawmakers and policy groups are debating whether to replace the current CPI-W formula with the CPI-E or chained CPI, which would have different effects on benefit levels and program solvency.
• Experts note that while adjusting the COLA formula could help, more comprehensive benefit reforms may be necessary to strengthen support for lower-income retirees and preserve Social Security’s long-term financial stability.

How do you feel about the 2026 COLA? Is it enough to keep up with your expenses? Do you think the formula should be changed—or is there a better solution? Have you found creative ways to stretch your Social Security dollars further?