<\/p>\n
Retired Americans collecting Social Security benefits often anticipate the annual cost-of-living adjustment (COLA) in their monthly paychecks, which is designed to ensure their benefits don’t lose value as prices for everyday items rise due to inflation.<\/p>\n
In my reporting on this and other personal finance topics over the years, I’ve found that these adjustments are of vital concern to Social Security recipients as they budget for expenses.<\/p>\n
Immediately prior to 2026, AARP (the nonprofit organization that advocates for Americans over 50) made a prediction about the 2.8% increase that was on its way for the new year.<\/p>\n
And because of economic developments four months into 2026, that forecast is more than a little relevant.<\/p>\n
“The COLA\u2019s impact on beneficiaries\u2019 purchasing power will depend largely on inflation trends in 2026,” wrote AARP. “If inflation cools, the 2.8 percent benefit increase could provide retirees with a modest financial cushion.” <\/p>\n
“But if prices continue to climb, the COLA may leave beneficiaries struggling to manage their expenses.”<\/p>\n
On April 10, the U.S. Bureau of Labor Statistics (BLS) released the March Consumer Price Index (CPI) report, which measures inflation.<\/p>\n
“In March, the Consumer Price Index for All Urban Consumers rose 0.9 percent, seasonally adjusted, and rose 3.3 percent over the last 12 months, not seasonally adjusted,” BLS wrote.<\/p>\n
At present, with inflation rising, the 2026 2.8% Social Security COLA appears to be worth less than hoped.<\/p>\n
That is shaping up to be a major problem for Social Security recipients.<\/p>\n
Social Security COLA prediction for 2027 raises concerns<\/p>\n
As the March CPI was reported, Social Security experts at The Senior Citizens League (TSCL) were already at work calculating what the coming COLA would be for 2027, still 8 months away.<\/p>\n
And the estimates they are offering may be cause for worry into the future.<\/p>\n
“Based on the latest CPI data, released this morning, TSCL predicts that Social Security\u2019s 2027 Cost of Living Adjustment (COLA) will be 2.8%, the same as the 2026 COLA of 2.8%,” TSCL wrote on April 10. “The average benefits check for retired workers would increase by $56.69, from $2,024.77 to $2,081.46.”<\/p>\n
More on personal finance:<\/p>\n
Zillow forecasts big mortgage change for U.S. housing marketAARP sounds alarm on major Social Security problemDave Ramsey bluntly warns Americans on 401(k)s<\/p>\n
Shannon Benton, TSCL executive director, explained her view on how Social Security recipients might feel about the early 2027 COLA estimate.<\/p>\n
“Americans are right to worry about our current COLA projection,” Benton said. “The fact is that most senior households already get by on only about 58% as much income as their working-age counterparts.”<\/p>\n
“And you\u2019d be hard-pressed to find a middle-class or working-class American who thinks the economy is doing well right now, especially as oil prices rise.”<\/p>\n
AARP explains other Social Security 2026 changes<\/p>\n
Besides the COLA change for 2026, AARP highlights other changes Social Security recipients are seeing this calendar year.<\/p>\n
Medicare premiumsThe standard Medicare Part B premium rose in January from $185 to $202.90, a 9.7% jump.Most enrollees pay this amount via automatic Social Security deductions, so the $17.90 monthly increase will partially offset their COLA.
\n(Source: AARP)
\nPaying Social Security taxesWorkers fund Social Security through a 12.4% payroll tax, split between employees and employers, while self\u2011employed people pay the full rate.The tax rate stays the same in 2026, but the taxable wage cap rises to $184,500, with earnings above that and non\u2011work income exempt.
\n(Source: AARP)
\nPaying taxes on benefitsA new deduction for people 65+ in 2026 reduces taxable income by up to $6,000 for eligible filers.Full deductions apply up to $75,000 Modified Adjusted Gross Income (MAGI) for singles and $150,000 for couples, with partial deductions available at higher incomes.The temporary break, running through 2028, reduces Social Security tax revenue by $168.6 billion and moves the retirement fund\u2019s depletion date to late 2032.
\n(Source: AARP)
\nSocial Security earnings testBefore full retirement age, beneficiaries lose $1 in benefits for every $2 earned above $24,480 in 2026.In the year someone reaches Full Retirement Age (FRA), the limit rises to $65,160, with $1 withheld for every $3 earned above it until the FRA month, after which deductions end and payments are adjusted upward.
\n(Source: AARP)<\/p>\n
AARP explains how inflation negatively impacts Social Security cost-of-living adjustments.<\/p>\n
Shutterstock<\/p>\n
AARP explains how Social Security COLA is calculated<\/p>\n
The SSA bases the COLA on the CPI\u2011W (Consumer Price Index for Urban Wage Earners and Clerical Workers), a BLS index that tracks monthly price changes for a fixed set of goods and services, including food, energy and medical care, according to AARP.<\/p>\n
SSA determines the annual adjustment by comparing the average CPI\u2011W for July, August and September of the prior year with the same three\u2011month average in the current year.<\/p>\n
“The percentage change is the COLA for the following year, typically announced in October,” AARP explained.<\/p>\n
For example, in 2025, the average CPI\u2011W for the third quarter came in 2.8% above the level recorded during the same period in 2024. That increase translated into a 2.8% COLA for 2026. <\/p>\n
Related: Fidelity, Fed raise red flags on 401(k)s and IRAs<\/p>\n
#AARP #warns #Americans #major #Social #Security #problem<\/p>\n","protected":false},"excerpt":{"rendered":"
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