Anticipated 2026 Cost-of-Living Adjustment (COLA) for Social Security, according to Senior Citizens League, bumps up to 2.7%

As many people approach retirement, the need to save aggressively and invest effectively becomes increasingly important. With the cost of living continually rising, it's essential to amass enough income to maintain a comfortable lifestyle during the retirement years.

One significant factor that impacts retirement income is the Cost-of-Living Adjustment (COLA) for Social Security benefits. However, the current measure used — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — has been argued to be inappropriate for calculating Social Security COLAs.

The Senior Citizens League, an organization that advocates for seniors, urges Congress to adopt legislation that would base the COLA on an inflation index specifically for seniors, such as the Consumer Price Index for the Elderly (CPI-E). This index places more emphasis on categories like healthcare and housing, which are typically more expensive for retirees.

For instance, if the upcoming 2026 COLA is 2.7%, it would result in an average monthly Social Security benefit of $2,061 for a retiree collecting a monthly benefit of $3,000. This translates to an additional $81 per month for that individual. For a retiree collecting an average monthly benefit of $2,007, the increase would mean an additional $54 per month.

It's worth noting that the average inflation rate over many decades has been roughly 3%. This means that the current COLAs may not keep pace with the overall increase in the cost of living, leading to a decrease in the purchasing power of Social Security benefits over time. In fact, benefits have lost over thirty percent of their purchasing power since 2000 due in large part to inadequate COLAs and rising healthcare costs.

The Social Security Administration is expected to announce the actual increase for 2026 in October. In recent years, the COLAs have varied significantly, with a 5.9% increase in 2022, a 3.2% increase in 2024, and an 8.7% increase in 2023.

In addition to Social Security, it can be effective to set up multiple income streams for retirement. This might include Social Security, dividend income, annuity income, income from rental properties, pension income, and so on. Retirement planning is very important, so take some time to think through issues such as how much income you'll need to retire with and how you'll amass it. Come up with a plan and then stick with it.

It's also worth mentioning that the longer you delay claiming your Social Security benefits, the bigger they'll get — and some studies suggest that the best age at which to claim, for most people, is age 70.

Finally, it's important to note that Social Security's coffers were already being depleted and are in need of some fixes by Congress. Changes enacted by the Trump administration are likely to deplete Social Security's funds even faster. As such, it's crucial for individuals to take responsibility for their retirement planning and to work towards building a secure financial future.