Why Social Security's 2026 Changes Will Most Hurt Retirees: The COLA Problem Explained

The Real Sting: When a Raise Isn’t Really a Raise

Here’s the hard truth about 2026: while Social Security beneficiaries will receive a 2.8% cost-of-living adjustment (COLA), this modest increase will likely fail to ease the financial burden that retirees face. As Shannon Benton, executive director of The Senior Citizens League, bluntly states: “The 2026 COLA is going to hurt for seniors.” This isn’t pessimism—it’s math. The problem isn’t the raise itself, but what it fails to cover.

The Numbers Don’t Add Up

The inflation gap tells the story. Retirees are already experiencing price increases well above 2.8%, particularly in sectors that matter most to their budgets. Most concerning is healthcare: Medicare Part B premiums will spike 9.7% in 2026. That’s more than three times the COLA increase, and it will consume a substantial portion of whatever benefit boost retirees receive from Social Security.

The underlying issue runs deeper. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—the metric used to calculate the COLA—doesn’t accurately reflect what seniors actually spend money on. It underweights healthcare costs, which are often retirees’ single largest expense category. The result: a cost-of-living adjustment that systematically understates cost-of-living increases for the demographic it’s supposed to protect.

Other Social Security Shifts Worth Noting

While the COLA gets the spotlight for all the wrong reasons, 2026 brings several other policy changes:

Tax Relief (With an Expiration Date): Nearly 90% of Social Security beneficiaries will see reduced federal income taxes in 2026, thanks to an enhanced tax deduction for seniors aged 65 and older. However, the Tax Policy Center’s analysis suggests most won’t escape taxes entirely—just pay less. Note this benefit expires in 2028.

Earning Limits Increase: Workers who claim benefits before full retirement age can earn slightly more without triggering benefit reductions. The earnings limit rises to $24,480 (up from $23,400), and the threshold for the year you reach full retirement age increases to $65,160 (from $62,160).

Higher Wage Base for FICA Taxes: The maximum earnings subject to Social Security taxes increases to $184,500 in 2026 (from $176,100 in 2025)—but this primarily affects higher-income workers.

Strategies to Counter the Squeeze

For retirees facing the reality of insufficient COLA increases, several approaches can help:

Review and Trim Expenses: Examine your spending patterns and identify discretionary costs. However, many retirees have already minimized spending wherever possible, leaving limited room for cuts.

Boost Non-Social Security Income: Consider withdrawing additional funds from retirement accounts like IRAs or 401(k) plans after consulting a financial advisor. Some retirees may also find part-time employment that fits their lifestyle and abilities.

Prioritize Health Management: This is the most universally applicable strategy. Exercise regularly, maintain a nutritious diet, take medications as prescribed, and schedule routine medical checkups. Since healthcare represents a major retiree expense, investing in prevention now reduces costs later.

The 2026 COLA increase will nominally hurt less than no increase at all—but it will meaningfully hurt more than the cost increases retirees will face. Preparation and strategic financial management are essential.