Is It Time for Congress To Change the Social Security COLA?

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By Aliss Higham

US News Reporter

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For millions of Americans relying on Social Security, small changes to the formula that calculates annual benefit increases can have an outsized impact. Social Security checks are a cornerstone of retirement income for over 50 million Americans, and Congress is now considering legislation that could reshape how those benefits adjust for inflation.

It comes as Americans of all ages continue to navigate rising costs. In October, the Social Security Administration (SSA) announced that benefits would grow by 2.8 percent in 2026 through the annual cost-of-living adjustment (COLA). Yet for many retirees, even modest increases barely keep pace with the real cost of living.

Two bills introduced in Congress in recent weeks aim to address this. The Boosting Benefits and COLAs for Seniors Act would overhaul the way annual adjustments are calculated, while the Social Security Emergency Inflation Relief Act would temporarily add $200 per month to Social Security payments until July 2026. Democratic Senators Elizabeth Warren of Massachusetts, New York's Kirsten Gillibrand, Ron Wyden from Oregon, and Minority Leader Chuck Schumer of New York, among others, co-sponsored the proposals.

Why the Formula Matters

Currently, Social Security benefits are adjusted based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This measure reflects the spending habits of younger, urban workers rather than those of retirees, whose costs often look very different.

The new legislation proposes switching to the Consumer Price Index for the Elderly (CPI-E), which tracks expenses like health care, prescription drugs, and housing—areas that tend to hit older Americans hardest. Advocates argue that using CPI-E would more accurately reflect seniors’ financial realities, potentially resulting in higher annual benefit increases.

“The addition of these items are rooted in reality and are a higher inflationary factor when added to the calculation for an annual Social Security COLA,” Chris Orestis, president of Retirement Genius, told Newsweek. He said that a CPI-E-based COLA could produce a “much more significant and long-lasting financial impact” than temporary cash boosts.

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Inflation Struggles

Social Security benefits have struggled to keep pace with inflation for years. In the 1990s and 2000s, 60 percent of COLAs outpaced inflation. In the 2010s, that dropped to 40 percent, and in the early 2020s, only one out of five COLAs beats inflation—the 8.7 percent increase in 2023, which owes to skyrocketing inflation during the coronavirus pandemic and its aftermath.

Meanwhile, research by The Senior Citizens League (TSCL) shows that Social Security benefits have lost roughly 20 percent of their value since 2010, despite ongoing COLA rises each year. On average, retired workers would need an extra $370 per month, or $4,440 annually, to restore lost purchasing power.

Seniors are acutely aware of these shortfalls. TSCL surveys indicate that 73 percent rely on Social Security for more than half of their income, and only 10 percent are satisfied with their current benefits, with annual increases in health care premiums eating away at any boost given by the COLA.

“Medicare Part B premiums consistently overtaking Social Security COLAs degrades American seniors’ quality of life over time,” says Shannon Benton, executive director of TSCL.

Short-Term Relief vs. Long-Term Solutions

The $200 monthly boost in the Social Security Emergency Inflation Relief Act is widely welcomed by seniors. But experts caution that it is a temporary measure. Orestis said that while a cash boost for retirees would naturally be welcome, “it is short-term relief lacking a broader strategy to address the impact of inflation on recipients beyond July 2026. This is more of a band aid waiting for a cure.”

Jackson Ruggiero, co-founder of DisabilityGuidance.org, told Newsweek that while the relief is “meaningful cash for households on tight budgets, it’s temporary and non-compounding.” Without a structural change, he says, the baseline benefits for seniors would not improve in the long term.

Even if the COLA formula changes to CPI-E, some gains could be offset by rising Medicare costs. The standard Medicare Part B premium will increase to $202.90 per month in January 2026, up from $185, marking the first time premiums have topped $200.

Over the last three years, these premiums have consistently risen faster than COLAs. Benton emphasizes that “rising Part B premiums have been ruining seniors’ finances” and warns that Congress must act to rein in health care costs if retirement income is to remain sustainable.

A Path Forward

Switching to CPI-E represents a potentially lasting improvement for seniors, aligning Social Security increases with the realities of aging and fixed incomes. But, despite being well-intentioned, it is not without challenges. Higher benefits also strain the Social Security trust fund, which could face insolvency within a decade if long-term reforms are not enacted.

For now, the proposed legislation signals a clear appetite among some lawmakers to better support older Americans.

Whether these bills pass and how they balance short-term relief with long-term sustainability will be crucial questions for millions of retirees watching Congress.

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