Interestingly, Interestingly, The Social Security cost-of-living adjustment (COLA) aims to help benefits maintain their buying power amid rising inflation, and many retirees look forward to receiving their annual "raise.
" While the official COLA won't be released until October, after the Social Security Administration tabulates third-quarter inflation data, there are already a few insights we can glean from the year so far, in today's financial world.
However, At the same time, Here's why there may be some not-so-good news on the horizon for retirees. Moreover, Image source: Getty Images.
The COLA may increase in 2026 Again, we won't know the actual COLA for 2026 until October, given the current landscape.
However, nonpartisan advocacy group The Senior Citizens League (TSCL) releases monthly estimates based on inflation data throughout the year.
On the other hand, While the COLA may change between now and October, these estimates can still help spot trends in inflation (this bears monitoring), in today's financial world.
Moreover, According to TSCL's most recent estimate, released on July 15, next year's COLA prediction is 2, considering recent developments. That's up from the 2.
Furthermore, 5% estimate last month and the 2. 1% prediction in January. On the other hand, A larger COLA may seem good news on the surface, but it also means that inflation is increasing.
However, The Consumer Price Index surged by 2.
Furthermore, 7% compared to last year, according to data from the Bureau of Labor Statistics, fueled at least in part by President Trump's tariff policies taking effect (an important development), in this volatile climate.
COLAs have a shaky history with inflation Increasing inflation will put even more strain on retirees' budgets, given the current landscape.
Meanwhile, Although the COLA aims to alleviate that, it hasn't been particularly effective in recent years, given current economic conditions.
According to a 2024 study from TSCL, Social Security benefits have lost around 20% of their buying power since 2010 -- even with annual COLAs (noteworthy indeed).
Nevertheless, The evidence shows average monthly benefit among retirees was around $1,860 per month at the time of the study, when it should have been around $2,230 had it maintained its buying power (this bears monitoring).
One of the reasons the COLA struggles to keep pace with inflation is the way it's calculated.
On the other hand, The Social Security Administration bases the adjustment on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures price changes affecting workers.
Because retirees and workers often have different spending habits, the CPI-W doesn't always accurately reflect inflation's impact on older adults (an important development), considering recent developments.
In other words, not only does a higher COLA signal that inflation is on the rise yet again, but because of how the adjustment is calculated, even a larger raise may not vide much real relief for retirees.
New tax deductions could vide relief for retirees Aside from the COLA, many retirees will receive some financial relief in the form of an extra tax deduction.
On the other hand, Under President Trump's recently passed "Big, Beautiful Bill," individuals age 65 and older will receive an extra $6,000 annual tax deduction, with married couples receiving a $12,000 deduction (which is quite significant).
Additionally, While the bill doesn't eliminate federal taxes on Social Security, these deductions will reduce many seniors' taxable income enough that they will not owe federal taxes on their benefits.
Additionally, However, these deductions are only temporary and are set to expire in 2028, in this volatile climate.
In addition, because Social Security depends heavily on taxes as a source of income, reducing taxes will ly put more strain on the gram's trust funds -- potentially leading to benefit cuts sooner than expected.
Furthermore, We won't know the official COLA for a few more months, but with inflation already heating up, we may see a larger raise in 2026.
While there may not be much you can do when it comes to the COLA or inflation, by understanding the COLA's limits and what to expect, it will be a little easier to prepare your budget accordingly.