Millions of Social Security beneficiaries are facing another financial setback as experts predict that next year’s cost-of-living adjustment (COLA) will be even lower than the adjustment set for 2025. On Tuesday, The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, released its latest projection, estimating that the 2026 COLA will be just 2.3%. This would mark a slight decline from the 2.5% adjustment expected in 2025.
What’s Driving the Decline in COLA?
The prediction follows new data from the Bureau of Labor Statistics, which revealed that the Consumer Price Index for Urban Wage Earners (CPI-W) stands at 3%. Since the Social Security Administration (SSA) calculates COLA based on the CPI-W for July, August, and September, TSCL expects the 2026 adjustment to be minimal.
COLA is determined by comparing the CPI-W data for those three months against the same period in the previous year. The CPI-W measures changes in consumer costs, including food, housing, healthcare, and other essential goods and services. When inflation rates stabilize or decline, COLA adjustments tend to follow suit.
A Continuing Trend of Smaller COLA Adjustments
If the forecast holds, this would mark the third consecutive year of shrinking COLA increases. In 2023, due to soaring inflation, Social Security recipients saw an 8.6% boost—the highest in over 40 years. However, that adjustment dropped to 3.2% in 2024 and further declined to 2.5% in 2025.
While the recent slowdown in inflation may be welcome news for consumers in general, it presents financial challenges for seniors who rely heavily on Social Security payments to cover rising costs in housing, medical care, and other essentials.
A Proposed Solution: Eliminating Taxes on Social Security Benefits
Although a lower COLA is bad news for Social Security beneficiaries, there is some hope. A newly reintroduced bill in Congress could provide financial relief by eliminating taxes on Social Security benefits. Rep. Thomas Massie (R-Ky.) has reintroduced the Senior Citizens Tax Elimination Act, a proposal to remove federal income tax on Social Security benefits.
According to TSCL, eliminating these taxes would save the average senior household approximately $3,000 per year.
“Eliminating taxes on Social Security benefits would be an excellent step to provide financial relief to American seniors, many of whom are struggling with a cost of living that is growing much faster than their incomes,” said TSCL Executive Director Shannon Benton.
Why Taxing Social Security Benefits is Controversial
Supporters of the bill argue that the current taxation system is unfair. Beneficiaries have already paid taxes on their earnings throughout their working lives via payroll deductions. However, Social Security benefits are still subject to income tax if recipients exceed a certain income threshold.
Despite this proposal’s potential benefits, critics argue that eliminating Social Security taxes could reduce government revenue and potentially weaken the program’s long-term stability.
More Action Needed to Help Low-Income Seniors
While eliminating taxes on Social Security would help some beneficiaries, TSCL warns that it wouldn’t be enough to assist lower-income seniors who are struggling the most.
“We need to do even more for low-income seniors whose dignity depends on Social Security payments that have already lost 20% of their buying power over the last 15 years,” Benton emphasized. “Many lower-income seniors already do not make enough to pay taxes on their Social Security benefits, and the only way to help them is by reforming Social Security’s COLAs.”
The purchasing power of Social Security benefits has steadily eroded due to inflation outpacing COLA increases. Many seniors, especially those with fixed incomes, find it increasingly difficult to afford necessities such as prescription medications, housing, and food.
What’s Next for Social Security Beneficiaries?
With the 2026 COLA expected to be among the lowest in recent years, Social Security recipients may need to tighten their budgets even further.
For now, the future of Social Security benefits remains uncertain as policymakers debate potential solutions. Whether the Senior Citizens Tax Elimination Act gains traction in Congress or new proposals emerge to address COLA concerns, seniors and advocacy groups will be closely monitoring developments that could impact their financial security.
In the meantime, beneficiaries are encouraged to plan, explore financial assistance programs, and stay informed about changes that could affect their Social Security payments.
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