At What Point Do COLA Increases Become Meaningless Amid Persistent Inflation?
The federal government’s latest inflation report didn’t provide much good news for consumers struggling with rising prices, although it could mean a fairly high Social Security cost-of-living adjustment (COLA) for seniors.
The annual COLA provides a boost to Social Security checks as way to help recipients deal with inflation. The problem is, the increase doesn’t always keep up with inflation – including this year.
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At what point do COLA increases become meaningless in the face of persistent inflation? According to some experts, they’re already meaningless. Keep reading to learn why.
What the COLA Might Look Like Next Year
Based on the latest inflation numbers, next year’s COLA is expected to be 3.8%, according to The Senior Citizens League (TSCL), a non-partisan advocacy group. That represents a gain of one percentage point from the current COLA of 2.8%.
If the 2027 increase does end up being 3.8%, it will be the highest since 2023, when the COLA was 8.7% (based on the previous year’s inflation rate).
The 2027 estimate was released on June 10, following publication of the May 2026 consumer price index (CPI) report by the U.S. Bureau of Labor Statistics. Overall inflation in May climbed 0.5% from the previous month and 4.2% from the previous year.
Annual inflation in May hit its highest point since 2023, Reuters reported, mainly due to a big spike in energy prices caused by the Iran war. The energy index rose 23.5% year-over-year.
Inflation Outpaces This Year’s Increase
One thing the latest inflation numbers show is that the 2026 COLA already lags the current inflation rate. While annual inflation is running above 4%, Social Security checks are only 2.8% higher than a year ago.
In this respect, the COLA is already meaningless in terms of dealing with inflation, according to some experts.
“We’re seeing inflation on the rise when more than half of seniors already can’t afford basic living standards,” TSCL executive director Shannon Benton said in a press release. “We’re talking about food, a roof over their head, and transportation. Many seniors already have to skip doctor’s appointments due to costs.”
Even a 3.8% COLA “won’t be enough to make up the difference between what seniors bring in and what they need to live with dignity,” Benton added.
A similar view was offered by Chad Cummings, an attorney and certified public accountant (CPA) at Cummings & Cummings Law who previously worked in finance and tax.
“We are more or less at the point where COLA adjustments are meaningless today,” he told MoneyLion.
New Calculation Needed?
One of the biggest issues with the annual COLA -- and one reason many see it as meaningless in fighting persistent inflation -- is that the formula used to calculate it is insufficient to help seniors pay their bills.
As the Social Security Administration (SSA) noted, the annual COLA is based on the consumer price index for urban wage earners and clerical workers (CPI-W). It’s calculated by using the average rate of CPI-W inflation in the third quarter of the year. When those figures come out, the data for July, August and September will be added together and divided by three to get the average.
But critics said it doesn’t account for senior-specific expenses such as increases in the Medicare Part B premium.
“For years, Social Security’s cost-of-living adjustment has failed to keep up with the real cost increases seniors face,” Benton said. “While the COLA is meant to protect beneficiaries from inflation, it relies on an inflation formula that does not accurately reflect how older Americans spend their money.”
According to Cummings, the COLA formula was broken even before inflation surged earlier this decade.
“No percentage increase can fix this as the formula measures the wrong variables,” Cummings said.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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