The Cost-of-Living Adjustment, sometimes known as the COLA, is an essential safety net for people who receive benefits from social programs.
Social Security recipients, military retirees, and people who claim disability benefits from the Veterans Administration rely on these adjustments to keep their purchasing power stable in the face of inflation.
There is a possibility that the modification made this year will not live up to expectations.
During the third quarter of the year, which runs from July to September, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is utilized by the Social Security Administration (SSA) in order to calculate the change in the cost of living adjustment (COLA).
This index monitors the changes in prices of more than 200 different commodities and services, such as food, housing, and transportation, among numerous others.
As a result of the unprecedented rate of inflation, the cost-of-living adjustments (COLA) for 2023 and 2024 have been significantly increased. The rate of inflation has decreased, which has resulted in a moderate cost of living adjustment of 2.5% for the year 2025. Experts anticipate an even more significant fall for the year 2026.
A pessimistic outlook for the year 2026
A probable adjustment of only 2.3% is suggested by preliminary projections for the cost-of-living adjustment for 2026, which were obtained from the inflation data for the first quarter of 2025 that was provided by the United States Census Bureau.
According to organizations such as the Senior Citizens League and the Military Officers Association of America, this would be the lowest rise in the cost-of-living adjustment (COLA) in the past five years.
It is essential to keep in mind that this is only an estimate based on statistics on inflation beginning in January and continuing through March.
The Social Security Administration (SSA) normally makes the announcement of the official cost-of-living adjustment (COLA) figure around the middle of October, following an analysis of inflation trends from July through September.
In the event that the adjustment is accepted, it will take effect on December 1 of the current year and will be reflected in payments commencing January 1 of the following year. A noteworthy possibility is that there will be no cost-of-living adjustment (COLA) implemented.
A cost-of-living adjustment might not be possible
The Consumer Price Index for the third quarter must be equal to or lower than the data for the previous year in order for a cost-of-living adjustment (COLA) to be awarded.
There have been just three instances of this scenario occurring since the implementation of automatic COLA adjustments fifty years ago, and those instances were in the years 2010, 2011, and 2016.
Despite the fact that inflation has recently slowed down, analysts are warning that it could go up once more as a result of the extensive tariffs that the United States government has implemented this year.
The cost of living adjustment (COLA) could see a higher increase in the event that inflation recovers; however, this would most likely come at the expense of increased prices that would be experienced by all households.
Source: Marca
