Millions of American elderly people are counting on social security to reach both ends. Half of the households, including a 65 -year -old person, relies on the government program for the majority of their income, according to data examined by the Social Security Administration.
This makes the annual adjustment of the cost of living, or Cola, an extremely significant number for households trying to follow the increase in the costs of goods and services. Although we are still about six months old to determine the exact beneficiaries of Social Security in 2026, the first data suggest that the elderly could be disappointed with the increase of next year.
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The prices could change it all. Here is where things are today and how prices could have an impact on your advantages next year.
Adjusting the cost of living, as its name suggests, is designed to help maintain social security in accordance with the cost of living. While social security began sending monthly checks in 1940, the Congress automated the cola calculation system until 1975.
The Cola is now based on an inflation measure called the consumer price index for employees and office workers (CPI-W). This is a single number published by the Bureau of Labor Statistics each month, by aggregating price changes in more than 200 categories of expenditure. The number changes depending on the increase or drop in prices for each category.
In order to calculate the cola in time for the services of January services, the Social Security Administration uses the average increase from one year to the other from CPI-W during the third quarter. This number became the cola of the following year. If it is negative, the elderly will not see any adjustment.
Many argue that the CPI-W does not reflect the real costs that the elderly face today. The Bureau of Labor Statistics developed a new reading of the IPC in 1987, which weighs the different categories of spending to align themselves with the expenses of the Americans aged 62 and over. This is called the consumer price index for the elderly, or CPI-e, and many believe that the cola should be based on these readings, instead.
While ICC-E and CPI-W can vary considerably from year to year, over the past 15 years, they have produced similar cumulative results. For the moment, Social Security still uses the ICC-W, and a forecast suggests that this could lead to disappointing cola for 2026.
Defense group of seniors The senior Citizens League publishes updates to her forecasts for the cola after each monthly version of the CPI of the Bureau of Labor Statistics. The most recent release occurred on April 10, which showed that the CPI-W of March was 2.2% higher than the same month of last year. It is a marked slowdown compared to the increase of 2.7% of February and the increase of 3% of January.
