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A new analysis projects the Social Security Administration’s (SSA) cost-of-living adjustment (COLA) for next year will be higher than previously projected.
The Senior Citizens League (TSCL) released its estimate for the 2026 COLA based on May inflation data and projected that it will be 2.5%, up from the prior month’s estimate of 2.4% and the March estimate of 2.3%. That marks the fourth consecutive month the TSCL model showed a higher COLA for next year.
The SSA adjusts the benefits paid to beneficiaries every year to account for the effect of inflation on consumer prices. The higher inflation, the larger the benefit increase.
The COLA for 2025 was 2.5%, which was the lowest annual increase since 2021, when an inflationary cycle began that peaked at a 40-year high in June 2022 before easing in the years that followed. That 2.5% increase boosted the average monthly Social Security benefit by $48, TSCL found at the time.
SOCIAL SECURITY COLA PROJECTED TO BE 2.5% FOR 2025, SMALLEST SINCE 2021
Social Security’s annual COLA for 2026 is projected to be 2.5%, according to TSCL’s analysis. (Photo illustration by Kevin Dietsch/Getty Images / Getty Images)
TSCL’s analysis also cited a recent report by The Wall Street Journal that found the Bureau of Labor Statistics (BLS), which collects monthly inflation data for its consumer price index (CPI), informed outside economists that a hiring freeze at the agency prompted the BLS to reduce the number of businesses where it checks consumer prices for its CPI report.
As a result, the agency has used a less proven method for guessing price changes more extensively than in the past, which prompted economists to raise concerns about the quality of the data in recent and forthcoming inflation reports. Less accurate data could have broader implications for the economy.
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Last year’s COLA was 2.5%. (iStock / iStock)
TSCL wrote that “any erosion in the CPI’s reliability presents big risks to seniors’ livelihoods” and affects future COLA and inflation predictions.
“While streamlining the federal government is a good thing, that shouldn’t involve cutting back on our ability to measure how our economy is changing,” said TSCL Executive Director Shannon Benton. “Inaccurate or unreliable data in the CPI dramatically increases the likelihood that seniors receive a COLA that’s lower than actual inflation, which can cost seniors thousands of dollars over the course of their retirement.
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Social Security’s annual COLA shifts the monthly benefit for the program’s beneficiaries based on inflation data. (Istock / iStock)
“Seniors should be concerned as inflation continues to tick upward,” Benton added, noting that TSCL’s research shows a disconnect between official inflation data and the inflation seniors experience on a daily basis as they participate in the economy.
“If the government tells us that prices are rising faster, it’s likely that seniors are already feeling the crunch.”
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The BLS CPI data for May showed inflation ticked slightly higher on an annual basis last month, rising 2.4% compared with a year ago. That figure was cooler than the 2.5% estimated by economists polled by LSEG, though it was still higher than the 2.3% figure in April.
