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A Social Security cost-of-living adjustment<\/a> of 2.8% will go into effect in 2026, increasing retirement benefits by $56 per month on average, according to the Social Security Administration<\/a>. With many older Americans<\/a> struggling to keep up with rising prices, the moderate adjustment is reigniting a long-standing debate on the calculations that go into the COLA<\/a>.<\/p>\n The size of the latest cost-of-living adjustment is about average. Out of 51 COLAs that have been put into effect since 1975, the 2026 adjustment ranks at No. 29, according to The Senior Citizens League<\/a>.<\/p>\n Yet just 10% of seniors are happy with the annual COLAs, a recent survey from the nonpartisan senior group found, based on responses from 1,920 adults age 62 or older.<\/p>\n The COLA is assessed each year to help benefits for approximately 75 million Americans keep pace with rising costs. Changing the underlying data used in its calculation could affect the size of beneficiaries\u2019 payments, and also have implications for Social Security\u2019s trust funds, which are running low.<\/p>\n<\/div>\n The Social Security cost-of-living adjustment is calculated based on a subset of the consumer price index, formally known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.<\/p>\n \u201cCPI-W has always been the measure that was used,\u201d said Emerson Sprick, director of retirement and labor policy at the Bipartisan Policy Center.<\/p>\n The announcement of the COLA for 2026 prompted some Democrats in Washington to propose a bill to change the index used for the COLAs to the Consumer Price Index for the Elderly, or CPI-E, which some contend would better reflect seniors\u2019 spending. Another group of Washington Democrats has pitched<\/a> increasing benefits by $200 per month for six months in 2026 to help beneficiaries cope with elevated consumer prices.<\/p>\n \u201cWe want the CPI-E or 3%, whichever one is higher,\u201d Shannon Benton, executive director at The Senior Citizens League, said of the group\u2019s long-term campaign for a more generous COLA.<\/p>\n<\/div>\n Yet the data suggests that switching to a different COLA measure might not result in the substantial boost to benefits that retirees and other beneficiaries hope to see.<\/p>\n Based on the current COLA formula, a person who claimed a $1,000 monthly benefit in 2005 would be receiving $1,601 now, according to Sprick\u2019s calculations.<\/p>\n If instead the COLAs had been indexed to the CPI-E over that period, their benefits would be $1,622 now, or just 1% more, according to Sprick.<\/p>\n Another measure that\u2019s often suggested for the COLA \u2014 the chained CPI \u2014 would result in a benefit of $1,555 now, or 3% less than the current formula, Sprick\u2019s calculations found.<\/p>\n Likewise, 2024 calculations by Alicia Munnell, a senior advisor at the Center for Retirement Research at Boston College, found<\/a> the average annual rate increase for the CPI-W was 2.5% from 2000 to 2023, based on CPI data from the Bureau of Labor Statistics. The CPI-E would have pushed that average annual rate of increase to 2.6% in those years, while the chained CPI would have resulted in a 2.2% average boost to benefits, Munnell found.<\/p>\n<\/div>\n \u201cIt all depends on when you retire,\u201d said Mary Johnson, an independent Social Security and Medicare analyst, who is among the advocates for switching to the CPI-E.<\/p>\n \u201cIn some years, it would have made a very big difference,\u201d Johnson said. \u201cIn other years, not so much.\u201d<\/p>\n Yet over the course of a 20- to 25-year retirement, indexing the COLA to the CPI-E would result in slightly higher benefits \u2014 and that compounds over time, she said.<\/p>\n<\/div>\n The current index used to calculate the COLA, the CPI-W, measures the changes in prices for a basket of goods and services consumed by urban wage earners and clerical workers.<\/p>\n It is a subset of the broader CPI index used to measure the rate of monthly and annual inflation, or the Consumer Price Index for All Urban Consumers, or CPI-U. The CPI-W and CPI-U indexes track each other very closely, according to Sprick, and over time will produce the same average COLAs.<\/p>\n The CPI-E weights expenditures differently compared with the CPI-W, with medical care, housing and recreation costs comprising a larger portion of the index, according the Bipartisan Policy Center. Other costs \u2014 including apparel, education, food and transportation \u2014 are not emphasized as much as they are in the CPI-W.<\/p>\n Another index, the chained CPI, shows how consumers adjust their buying behavior in response to price changes across categories, such as substituting chicken when the price of beef rises.<\/p>\n The chained CPI is \u201cmost accurate\u201d because it includes a broader segment of the population, according to Romina Boccia, director of budget and entitlement policy at the Cato Institute, who is among the advocates for changing to that measure.<\/p>\n<\/div>\n The chained CPI represents 1 out of 8 Americans in its calculation, while the current index used for the COLA, the CPI-W, includes the purchasing behavior of 1 in 3 Americans who are not seniors, Boccia said.<\/p>\n The chain component of the CPI reflects not only inflation, but also its impact on purchasing power, she said.<\/p>\n \u201cThat\u2019s what we\u2019re really trying to account for, is the purchasing power of the Social Security benefit,\u201d Boccia said. \u201cWe\u2019re trying to keep that fixed.\u201d<\/p>\n<\/div>\n Updating the way the COLA is measured, and in turn, the benefits people receive, would have an impact on Social Security\u2019s trust funds. The trust fund the program relies on to pay retirement benefits may run out in 2032, according to the Social Security Administration\u2019s latest projections based on changes in the \u201cbig beautiful\u201d legislation Congress passed in July.<\/p>\n A switch to the chained CPI would reduce the program\u2019s shortfall by 14%, while turning to the CPI-E would increase it by 11%, according to the Bipartisan Policy Center, citing estimates from the Social Security chief actuary.<\/p>\n Even as Social Security faces long-term funding woes, 34% of respondents in The Senior Citizens League survey said they would want the Trump administration and Congress to prioritize better COLAs, while 33% said they would want fixing the program\u2019s finances to come first.<\/p>\n<\/div>\n Many of today\u2019s seniors say the current COLA only goes so far to help with higher costs. Prices for electricity, natural gas and meat are still up significantly, said Johnson, who is retired.<\/p>\n \u201cHeaven help you if you have a flat tire or you need to do something with your car,\u201d Johnson said. \u201cJust the parts are so expensive these days.\u201d<\/p>\n Beneficiaries are also expected to face higher Medicare Part B premiums in 2026. Medicare\u2019s trustees have projected the standard monthly premium may rise 11.6% to $206.50 next year, up from $185 per month in 2025. Because those premiums are typically deducted directly from Social Security checks, they will affect how much of the COLA beneficiaries may see reflected in their checks.<\/p>\n How far Social Security benefits go depends on the area in which a retiree lives, according to the Elder Economic Security Standard Index, which was developed by the Gerontology Institute at the University of Massachusetts Boston to measure the income older adults need to pay for their basic needs and age in place.<\/p>\n<\/div>\n \u201cWhile the cost-of-living adjustment is important, there are still too many people who are at the maximum benefit they can withdraw, whether it\u2019s individual or with a spouse, [that] is still really low,\u201d said Michelle Putnam, director of the Gerontology Institute.<\/p>\n Social Security is the primary source of income for 40% of older Americans, according to AARP.<\/p>\n To help shore up benefits for those who are struggling, some experts, including Boccia at the Cato Institute and Sprick at the Bipartisan Policy Center, say broader benefit reform is necessary.<\/p>\n \u201cCertainly, benefits should be strengthened for some beneficiaries; the way to do that is not through COLA,\u201d Sprick said.<\/p>\n Instead, the way benefits are calculated could\u00a0be changed to ensure that beneficiaries who are at the lower end of the lifetime earnings distribution receive an adequate benefit from the time they claim, he said.<\/p>\n<\/div>\n<\/div>\n\nRead more CNBC personal finance coverage<\/h2>\n
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Social Security checks under different measures<\/h2>\n
COLA calculations under other indexes<\/h2>\n
Some experts say other reforms could help<\/h2>\n
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