At the start of 2026, Social Security benefits got a 2.8% cost-of-living adjustment (COLA). And while that’s by no means the smallest COLA to ever come through in the program’s history, it’s also far from the most generous.
In a recent Motley Fool survey, 54% of Social Security recipients said a 2.8% COLA isn’t enough of a raise. And 68% said that boost will provide little to no help in covering essential living costs.
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Now the good news is that so far, 2026’s Social Security COLA seems to be outpacing inflation. But that victory may be short-lived.
How 2026’s Social Security COLA is holding up so far
Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In January, the CPI-W increased 2.2% on an annual basis. That means this year’s COLA is currently outpacing CPI-W increases.
That should be a win for Social Security recipients. But that advantage may be temporary.
Economic conditions could easily change
Even though this year’s COLA seems to be outpacing inflation so far, it’s early in the year. And things could easily change.
Tariff policies could lead to higher costs. Energy prices could spike, as they have been. A host of things could happen that drive inflation upward. We just don’t know.
It’s important to remember that Social Security COLAs are backward-looking. They account for past inflation readings rather than for expected inflation levels in the future. But that’s only one flaw in the way Social Security COLAs are calculated.
Benefits are likely to fall short either way
While 2026’s Social Security COLA may be beating inflation now, beneficiaries are likely to lose buying power for one big reason — their expenses tend to rise faster than the CPI-W. And that’s because the CPI-W does not do a good job of capturing the costs seniors specifically face.
Older Americans tend to spend a large share of their income on healthcare, which often goes up in cost at a faster pace than broad inflation. Working Americans, whose costs the CPI-W does capture, tend to spend their money differently.
Some advocates feel that Social Security COLAs should not be based on the CPI-W but rather the Consumer Price Index for the Elderly, which better accounts for costs seniors face. But that proposal has yet to be adopted.
Prepare for this year’s COLA to lag inflation
There’s a good chance that as the year goes on, the 2026 Social Security COLA will start to lag inflation — even if that does not seem to be happening just yet. And that’s something seniors need to prepare for.
If you’re a retiree and get most of your income from your Social Security benefits, now’s a good time to assess your spending and see if there are ways to reduce your costs. You may also want to look into working part-time, which you’re allowed to do as a Social Security recipient. Just keep in mind that if you haven’t reached full retirement age yet, you’ll be subject to an earnings test.
If you have some retirement savings, your portfolio may need to do more of the heavy lifting if inflation picks up more. To that end, make sure your investments are poised for growth.
While it’s a good idea to scale back on stocks in retirement, you don’t want your portfolio to be completely devoid of them. You may specifically want to focus on dividend stocks and ETFs (exchange-traded funds) for reasonably steady income.
For now, 2026’s 2.8% Social Security COLA is running slightly ahead of the most recent CPI-W inflation readings. But that situation may not last long. And seniors shouldn’t expect it to.
