AARP warns Americans about inflation’s impact on Social Security COLA

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.

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.

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.

And because of economic developments four months into 2026, that forecast is more than a little relevant.

“The COLA’s impact on beneficiaries’ 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.” 

“But if prices continue to climb, the COLA may leave beneficiaries struggling to manage their expenses.”

On April 10, the U.S. Bureau of Labor Statistics (BLS) released the March Consumer Price Index (CPI) report, which measures inflation.

“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.

At present, with inflation rising, the 2026 2.8% Social Security COLA appears to be worth less than hoped.

Social Security COLA prediction for 2027 raises concerns

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.

And the estimates they are offering may be cause for worry into the future.

“Based on the latest CPI data, released this morning, TSCL predicts that Social Security’s 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.”

Shannon Benton, TSCL executive director, explained her view on how Social Security recipients might feel about the early 2027 COLA estimate.

“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.”

“And you’d 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.”

AARP explains other Social Security 2026 changes

Besides the COLA change for 2026, AARP highlights other changes Social Security recipients are seeing this calendar year.

Medicare premiums

• The standard Medicare Part B premium will rise in January from $185 to $202.90, a 9.7% jump, with the final figure confirmed later this fall.
• Most enrollees pay this amount via automatic Social Security deductions, so the $17.90 monthly increase will partially offset their COLA.
  
  (Source: AARP)

Paying Social Security taxes

• Workers fund Social Security through a 12.4% payroll tax, split between employees and employers, while self‑employed 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‑work income exempt.
  
  (Source: AARP)

Paying taxes on benefits

• A new deduction for people 65+ in 2026 will reduce 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, will reduce Social Security tax revenue by $168.6 billion and move the retirement fund’s depletion date to late 2032.
  
  (Source: AARP)

Social Security earnings test

• Before 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.
  
  (Source: AARP)

AARP explains how Social Security COLA is calculated

The SSA bases the COLA on the CPI‑W (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.

SSA determines the annual adjustment by comparing the average CPI‑W for July, August and September of the prior year with the same three‑month average in the current year.

“The percentage change is the COLA for the following year, typically announced in October,” AARP explained.

For example, in 2025, the average CPI‑W 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.