Social security is usually the largest source of retirement income, but many adults believe that benefits have been lagging behind for inflation. Last year, Motley Fool explored 2000 retired workers, and a majority said that there were failing to keep up with the price increase in prices in 2024 and 2025.
Unfortunately, the beneficiaries will probably get even less increase next year. The adult citizen League, a non -party advocacy group, recently reviewed its forecast for Cola 2026 to 2.2%. Retired workers have not received a less increase in the pay of 2021, but there may be more news about beneficiaries.
Here are the important details.
Retired social security workers receive annual corrections to the costs of life (Colas) designed to guarantee an increase in payments of inflation lock benefits. These Colas are based on a subsequent of the consumer prices index known as the CPI-W, which measures the changes in prices based on the cost of time workers.
Mathematics is simple: CPI-W from the third quarter of the current year (July to September) is divided into CPI-W from the third quarter of the previous year, and the increase in the increase becomes Cola next year. For example, CPI-W increased by 2.5% in the third quarter of 2024, so social security benefits received 2.5% Cola in 2025.
CPI-W inflation measured 2.7% in February, less than 3% in January. This caused the adult league (TSCL) to reduce its Cola 2026 forecast from 2.3% to 2.2%. But this is not a problem, because Colas simply compensates for the pricing beneficiaries. To put it another way, the size of Cola is irrelevant as long as it matches inflation.
The problem is the fact that social security cola is based on CPI-W inflation. As mentioned, CPI-W measures the price changes based on the spending habits of hourly employees. But working adults are usually younger than social security retirees, and young people spend money differently from the elderly.
Most importantly, retired workers usually spend more on homes and medical care and less about education and transport. Therefore, the CPI-W mistakenly represents those who spend groups in terms of social security recipients.
This brought me to the problem of the estimated 2.2% Cola in 2026: total inflation of the CPI-W fell by 0.3 percentage points to 2.7% in February, but housing and medical care prices increased at the same rate, as in the previous months, and the inflation in these groups was