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Yahoo
3 days ago
- Business
- Yahoo
Social Security COLA Estimates Are Out -- How Do They Compare to Past Years?
The Social Security cost-of-living adjustment (COLA) is meant to offset inflation. The projected COLA for 2026 is below the average COLA since 1975. Some have recommended using the CPI for the Elderly to determine the COLA. The $23,760 Social Security bonus most retirees completely overlook › To keep pace with rising prices, Social Security applies an annual cost-of-living adjustment (COLA) that takes effect in January each year. The Senior Citizens League (TSCL), a nonprofit organization that advocates for senior rights, publishes COLA estimates based on inflation data. In its latest forecast, released on June 11, TSCL predicts a 2.5% COLA for 2026 -- the same as 2025, but below the 3.4% average since 1975. The official COLA won't be announced by the Social Security Administration (SSA) until October, but it's worth paying attention to estimates, so current and soon-to-be retirees can begin planning their finances accordingly. To determine the percentage to set the COLA at each year, Social Security considers the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a measure of inflation published monthly by the Bureau of Labor Statistics (BLS). It looks at the prices of common expenses, such as housing, food, transportation, and medical care. Here are the steps that Social Security follows to calculate the COLA: Average the CPI-W data for the third quarter (July, August, and September) of the current year. Compare the current year's average to the average of the previous year. If it increased, set the COLA to match the percentage increase; if it decreased or remained the same, there is no COLA. For example, if the CPI-W average from the current year is 3% higher than the previous year, the COLA going into the next year will be set at 3%. Although Social Security retirement benefits began in 1940, the annual COLA wasn't a thing until 1975. Since then, the average annual COLA has been 3.4%, but the amounts have varied widely. The highest COLA ever was in 1980, at 14.3%. The lowest COLAs were in 2010, 2011, and 2016, when there were no benefit increases. Here are the past 10 COLAs: Year Percentage 2025 2.5% 2024 3.2% 2023 8.7% 2022 5.9% 2021 1.3% 2020 1.6% 2019 2.8% 2018 2% 2017 0.3% 2016 0% Data source: SSA. The annual COLA is appreciated, but it hasn't always kept up with inflation enough to reasonably cancel it out. According to TSCL, the buying power of Social Security benefits has decreased by 20% since 2010. This means that $1 in benefits then would be worth around $0.80 now. Not ideal. One issue that has been raised is that the CPI-W may not be the best inflation measure when considering expenses common among retirees. For example, the CPI-W doesn't include certain healthcare costs, such as long-term care and prescription drugs, which are a major expense for many retirees. One change that has been proposed is using the Consumer Price Index for the Elderly (CPI-E) -- which applies to people age 61 and older -- to determine the annual Social Security COLA. The CPI-E gives more weight to healthcare and housing costs, and typically comes in higher than CPI-W data. A study by the Congressional Research Service (CRS) showed that using CPI-E versus CPI-W would have resulted in larger COLAs and higher monthly Social Security benefits. Since 1986, a COLA based on the CPI-E would've been the same or higher than the actual COLA in all but six years. There's no telling if the COLA process will get revamped, so for now and the foreseeable future, we're stuck with using CPI-W data. It's far from perfect, but it's the reality for right now. The best thing retirees can do is prepare for what could possibly be a below-average COLA and begin planning accordingly. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security COLA Estimates Are Out -- How Do They Compare to Past Years? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
USA Today
22-06-2025
- Business
- USA Today
Do you understand these 3 critical facts about Social Security COLAs?
We're just a few months away from Social Security's 2026 cost-of-living adjustment (COLA) announcement. If you're already claiming checks, it could be the most important Social Security news you get all year because it tells you how much you can expect to get from the program in 2026 − and how much of your expenses you'll have to cover on your own. The only true way to know how much you'll get next year is to wait for the official COLA announcement in October. But understanding these three key COLA facts can help you get some idea of what to expect now. 1. How the COLA calculation works The Social Security Administration bases the COLA on the difference in average third-quarter inflation data from one year to the next, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It sounds more complicated than it is. To calculate the 2026 COLA, it will add the CPI-W numbers for July, August, and September of 2025 and divide them by three to get the average. Then, it will compare that average to the average from the same months in 2024. The percentage increase reflects the COLA amount. So if the 2025 average is 3% higher, the 2026 COLA would be 3%. We don't have all the data to perform the calculation yet, which is why the Social Security Administration doesn't announce the COLA until October. That's when the September 2025 CPI-W number comes in. 2. COLAs are a percentage of your checks The Social Security Administration represents COLAs as a percentage. It adds this percentage to your existing checks to determine your 2026 benefit amount. That means everyone will see a unique dollar-value increase. The difference can be pretty significant. Someone claiming a $2,000 monthly check would only get $50 extra dollars from a 2.5% COLA, while someone claiming a $5,000 monthly check would get $125 more per month. 3. COLAs don't actually help your checks keep up with inflation The whole idea of COLAs is to help your Social Security checks' buying power remain steady over time. But research suggests this isn't actually happening. Benefits have lost 20% of their buying power since 2010, according to The Senior Citizens League (TSCL), a nonpartisan senior group. That means you'd need $1 to buy something you could've bought with $0.80 in 2010. This trend doesn't show any signs of slowing down, either. TSCL's latest estimate puts the 2026 COLA at just 2.5% -- the same as 2025. However, there is a chance it could be a bit higher if inflation rises over the next few months. There's a real chance you may get less than you'd hoped for, though. You can try several things to overcome this predicament. If you have personal savings, you can use them to supplement your Social Security checks. You could also consider working part-time or signing up for government benefits, like Supplemental Nutrition Assistance Program (SNAP) benefits and Supplemental Security Income (SSI). This can give you some help with your essential costs so you can use your Social Security checks in other areas. It's not too early to start brainstorming how you'll want to tackle your budget in 2026. But just note that you may have to adjust your plans in October when the Social Security Administration announces the official 2026 COLA. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
Yahoo
22-06-2025
- Business
- Yahoo
Social Security's 2026 COLA Is on Track to Do Something That Hasn't Happened in 41 Years
The Senior Citizens League predicts a 2026 Social Security COLA of 2.5% -- the same increase received in 2025. The last time there was the same COLA in back-to-back years was in 1983 and 1984. Retirees shouldn't bet on a 2026 COLA of 2.5% just yet, though. The $23,760 Social Security bonus most retirees completely overlook › Is it too early to speculate how much more retirees might receive in Social Security benefits next year? Nah. In fact, The Senior Citizens League (TSCL), a nonprofit organization that advocates for seniors, does it every month. TSCL's latest cost-of-living adjustment (COLA) prediction was especially intriguing. Social Security's 2026 COLA is on track to do something that hasn't happened in 41 years. TSCL's statistical model is updated throughout the year. This model uses multiple factors to predict the next Social Security COLA, including the Consumer Price Index (CPI), the Federal Reserve's interest rate, and the U.S. unemployment rate. The CPI is arguably the most important piece of data used to predict the next Social Security COLA. The COLA itself is calculated using a variant of the CPI, called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures inflation experienced by primarily blue-collar workers who live in urban areas. There has been a distinct trend in TSCL's COLA predictions so far this year. The nonprofit organization's statistical model has generated a higher projected COLA for four consecutive months. Its latest prediction is for a 2026 COLA of 2.5%. Is a higher COLA a good thing for retirees? Not necessarily. TSCL executive director Shannon Benton warned: Seniors should be concerned as inflation continues to tick upward. TSCL's research shows that there's a serious disconnect between the inflation the government reports and the inflation that seniors experience every day. If the government tells us that prices are rising faster, it's likely that seniors are already feeling the crunch. A steadily increasing Social Security COLA prediction isn't unusual. When inflation rises, it tends to continue to rise. There's sometimes a momentum effect at work. What is out of the ordinary about TSCL's latest projected 2026 COLA, though, is that it matches the Social Security benefits increase of 2.5% received in 2025. Perhaps surprisingly, the last time there were identical back-to-back Social Security increases was in 1983 and 1984. The annual COLA in both years was 3.5%. Some might look at the history of Social Security COLAs and argue that the last time the COLA was the same in back-to-back years was more recent than 41 years ago. They could point out that the COLA was 0% in both 2009 and 2010. That is true. However, an adjustment of 0% is no adjustment at all. And if there's no adjustment, there's no COLA. The last time Social Security benefits were truly adjusted by the same amount in two consecutive years to reflect a change in the cost of living was in 1983 and 1984. That said, there have been instances where the Social Security COLA was the same in two close but nonconsecutive years. This occurred in 1993 and 1995, when the benefits increase was 2.6%. It also happened in 2012 and 2014, with COLAs of 1.7% in both years. Is it a slam dunk that the 2026 Social Security COLA will do something that hasn't happened since 1984? Don't bet on it. The actual 2026 COLA will be determined based on the average CPI-W for the third quarter of 2025 compared to the average for the third quarter of 2024. Retirees won't know the final number until the Social Security Administration releases it in mid-October. There are also some reasons to suspect the inflation level will continue to rise later this year. The full impact of President Donald Trump's tariffs hasn't been felt yet. This is due in part to businesses increasing their inventory levels before the tariffs took effect. Many economists predict that inflation will rise more significantly during the summer months. The Social Security COLA's 41-year streak might not be broken after all. But retirees might wish it were. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Social Security's 2026 COLA Is on Track to Do Something That Hasn't Happened in 41 Years was originally published by The Motley Fool
Yahoo
17-06-2025
- Business
- Yahoo
The Social Security 2026 COLA Forecast Was Just Updated. There's Good News and Bad News for Retirees.
A recent survey from analytics company Gallup found that Americans are particularly worried about the economy, inflation, and Social Security. The Senior Citizens Leagues recently revised its forecast higher for Social Security's 2026 COLA because inflation is cooling more slowly than expected. Despite upward revisions, Social Security's 2026 COLA may be too small to entirely offset inflation for retired workers because of rising housing and medical costs. The $23,760 Social Security bonus most retirees completely overlook › A recent Gallup poll found that Americans are increasingly worried about the economy, inflation, and Social Security. Those three issues ranked among participants' five greatest concerns, and the percentage of people that "worry a great deal" about Social Security benefits reached a 15-year high. Those topics intersect in Social Security's cost-of-living adjustments (COLAs), annual pay increases that help beneficiaries keep up with rising prices across the economy. The Social Security Administration will announce the official 2026 COLA this October, and retired workers are probably hoping for a big raise. On that note, the lastest 2026 COLA forecast comes with good news and bad news. The good news is the forecast trended higher, meaning Social Security benefits could increase more than originally expected next year. The bad news is retirees may still feel as if the pay raise is too small. Read on to learn more. The Senior Citizens League (TSCL) is a nonprofit advocacy group focused on Medicare and Social Security policies. Its forecast in January said Social Security benefits would receive a 2.1% cost-of-living adjustment (COLA) in 2026, but TSCL has since revised that figure higher. Here are the forecasts the group published each month this year: January: 2.1% February: 2.3% March: 2.2% April: 2.3% May: 2.4% June: 2.5% Readers may wonder why the forecast has been revised higher so many times. Inflation is moderating less quickly than TSCL originally expected. In fact, inflation as measured by the Consumer Price Index (CPI) actually increased in May after slowing in the three preceding months. A larger COLA means a bigger pay increase for Social Security recipients. For instance, the average retired-worker benefit was $2,002 in May 2025. The 2.5% COLA forecast by TSCL would bring that figure to $2,052, meaning the average retiree would get an extra $50 per month, or $600 for the full year, in 2026. Alternatively, the 2.1% COLA originally forecast by TSCL would bring that average benefit to $2,044 next year. In that scenario, the average retired worker would receive an extra $42 per month, or $504 for the full year, in 2026. So the good news for retired workers on Social Security is the latest COLA forecast implies a larger pay increase next year. Measuring inflation is an inexact science because the extent to which rising prices impact someone depends on how they spend money. For instance, someone who does not attend school (nor pay tuition for anyone else) would not be affected by rising education costs. But higher education costs would greatly affect a college student. Social Security's COLAs are based on a subset of the CPI known as the CPI-W. It measures inflation using the spending habits of working-age adults, but they spend money differently than seniors on Social Security. Most notably, seniors spend more on housing and medical care, which means they are more sensitive to inflation in those categories. Unfortunately, inflation in those spending categories is running above average this year. To elaborate, overall CPI-W inflation measured 2.2% in May, but inflation within the categories of medical care and housing was 2.5% and 3.9%, respectively. Retired workers spend more money on those things, so the CPI-W is likely to understate inflation from their perspective. Here's the bottom line: TSCL recently raised its 2026 COLA forecast to 2.5%, which on the surface seems to be good news for retired workers on Social Security. However, underlying trends in the inflation data -- namely, housing and medical care costs are increasing faster than the overall CPI-W -- suggest a 2.5% pay increase in 2026 would be too small for many retirees. That's the bad news. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. The Social Security 2026 COLA Forecast Was Just Updated. There's Good News and Bad News for Retirees. was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-06-2025
- Business
- Yahoo
Social Security COLA increase: Senior group issues projection, but warns of potential new ‘problems'
(NEXSTAR) – What kind of bump can Social Security beneficiaries expect in 2026? A new projection from the Senior Citizens League expects a modest one — if indeed the data they're interpreting is accurate. The Senior Citizens League (TSCL) is a nonpartisan senior advocacy group aiming to educate older Americans about laws, rights and financial issues facing their demographic in retirement. The organization is also known for its accurate projections of upcoming Social Security increases — or cost-of-living adjustments (COLA) — which are determined annually by the Social Security Administration. Inflation rose slightly last month as grocery prices ticked higher The Social Security Administration's COLA is designed to help Social Security and Supplemental Security Income (SSI) recipients retain their buying power amid rising inflation. These increases, which are issued annually, are determined using the Bureau of Labor Statistics (BLS) and its Consumer Price Index (CPI), which itself is a measure of the change in prices for common consumer goods and services. Based on current data from the latest CPI, The Senior Citizens League estimates a 2.5% bump for Social Security recipients in 2026, which is slightly higher than the 2.4% projected last month. But the group is also warning of potential 'problems' with recent BLS data, pointing to reports of hiring freezes and staffing shortages. These issues have resulted in the collection of 'less accurate' CPI data, and may result in seniors getting shortchanged come 2026, TSCL argues. 'If the government fails to act and the CPI's data quality begins to erode, it increases the likelihood of the government providing a COLA that doesn't match inflation,' the group writes. Last week, the BLS indeed admitted that it had stopped collecting data for its indexes in three cities: Lincoln, Nebraska; Provo, Utah; and Buffalo, New York. It was also 'reducing sample areas across the country' when collecting data related to inflation. The agency said that it 'temporarily reduced the number of outlets and quotes it attempted to collect due to a staffing shortage' beginning in April. The reduced data collection 'will be kept in place until the hiring freeze is lifted,' according to an email viewed by the Associated Press. Costco will let customers shop without crowds (for a price) The inflation data plays a huge role in the U.S. economy. Not only is it used to calculate the annual COLA adjustments for tens of millions of Social Security recipients, but it also helps determine the interest rate paid in about $2 trillion of inflation-adjusted Treasury bonds. Many private-sector wages are also influenced by the CPI. '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 in a news release. '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.' Aside from concerns over the Bureau of Labor's data collection, TSCL has long argued that COLA increases in recent years have failed to keep up with rising costs for seniors, claiming that the CPI-W does not accurately reflect the spending habits of older adults. A 2025 survey of seniors receiving Social Security benefits also indicated that most spend over 1,000 per month on healthcare costs alone. They also estimated that their own costs had risen higher than 3% over the last year — well over the 2.5% suggested by the latest CPI data. A spokesperson for the Bureau of Labor Statistics has said the collection cutbacks will have 'have minimal impact' on its consumer price indexes, 'but they may increase the volatility of subnational or item-specific indexes.' 'BLS will continue to evaluate survey operations,' the agency writes. The amount of next year's COLA increase, however, won't be officially announced by the Social Security Administration until October. The 2026 increase will also be based on BLS data from the upcoming third quarter (July, August and September) of 2025. The Associated Press contributed to this report. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
