Projections for Social Security’s COLA increased slightly for February, The Senior Citizens League (TSCL) reported Wednesday morning. Despite the increase, the projection is considerably lower than the agency’s initial forecast in December.
The Senior Citizen’s League projects the 2026 Social Security COLA to come in at 2.3%, a modest decrease from its 2.5% estimate in December but still marginally higher than the 2.1% predicted last month.
The figure is lower than the 3.0% yearly change in the CPI-W—the index used to calculate the COLA— announced by the Bureau of Labor Statistics (BLS) on Wednesday morning.
Each month, TSCL issues a new prediction of the next Social Security COLA using its statistical model. The model incorporates the Consumer Price Index (CPI), the Federal Reserve interest rate, and the national unemployment rate. The model’s predictions update every month, adjusting in response to economic conditions.
TSCL released a new version of the model, v1.2, in January 2025. The new version updates the model’s use of dates, processing data according to the federal fiscal year instead of the calendar year. The new model also reduces each prediction’s reliance on previous predictions made throughout the federal fiscal year.
In its announcement, the TSCL reiterated its support for President Donald Trump’s campaign to eliminate taxes on Social Security benefits. The agency also voiced its approval of The Senior Citizens Tax Elimination Act, a bill reintroduced by Representatives Thomas Massie (R-KY) and Daniel Webster (R-FL) that would reduce double taxation on Social Security benefits for middle-class seniors.
While seniors are already subjected to payroll tax on Social Security benefits throughout their careers, some must also pay taxes on the benefits throughout retirement. The legislation would amend the Internal Revenue Code of 1986 to end tier I railroad retirement benefits and Social Security benefits in an individual’s gross income.
“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. “It would also reduce double taxation, which is inherently unjust.”
TSCL projects that eliminating taxes on Social Security benefits would save the typical senior household about $3,000 annually if implemented in 2025. In its upcoming analysis for the March edition of its Advisor newsletter, the agency projects that a typical senior household would pay $3,940 in federal income taxes if Social Security benefits were excluded, compared to an estimated $7,022 under the current law—resulting in a savings of $3,082.
Removing taxes on Social Security benefits could also “relieve lagging COLAs,” says Benton. According to the TSCL, estimated savings from the bill would account for “nearly 69% of the buying power Social Security payments have lost since 2010 due to inadequate COLAs.” TSCL research estimates that the average yearly Social Security benefits for retired workers are worth approximately $4,442 less today than they were in 2010, after adjusting for inflation.
However, even if the bill is passed into law, low-income seniors would not see a difference in their Social Security benefits as these groups already do not pay taxes on them. The TSCL warns that without the legislation, “the tax thresholds that have not been adjusted for inflation since 1984 will result in more low-income seniors paying taxes as annual COLAs accumulate.”
“We need to do even more for low-income seniors whose dignity depends on Social Security payments that have already lost 20 percent of their buying power over the last 15 years,” said Benton. “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 legislation comes as the Trump administration promises to implement “the largest tax cut in history,” that would include exemptions on tips, Social Security benefits, and overtime pay, according to White House press secretary Karoline Leavitt.
Trump assured voters during his campaign trail that if elected, he would incorporate widespread tax cuts and offset the taxes by enacting high tariffs on international trade, a strategy that has drawn mixed reactions and uncertainty from economists, who say it could potentially weaken Social Security’s solvency and invite retaliatory tariffs from trading partners.
“President-elect Trump’s suggestion to eliminate the taxation of Social Security benefits is likely to be popular with many older voters, but it could have the unintended consequence of causing Social Security to go insolvent two years sooner than currently forecast—by 2033,” Mary Johnson, an independent Social Security and Medicare policy analyst, told 401(k) Specialist in November.
Despite his calls to lower taxes and inflation on “Day 1” of his presidency, government data released on Wednesday found that prices increased in January, a possible result of Trump’s trade war. However, Trump faulted former President Joe Biden for the higher costs in a Truth Social post on Wednesday, writing “BIDEN INFLATION UP!”
Under Trump’s first month in office, consumer prices grew by 3% in January compared to a year ago, while egg prices skyrocketed 53% compared to last January.
Other rising goods include beef (5%) and bacon (6%), while bread, rice, and tomatoes all dropped in price.
EDITOR’S NOTE: This article has been updated to reflect the latest Social Security COLA forecast.
Cooling inflation could lead to the lowest Social Security COLA for next year since the start of the COVID-19 pandemic, according to a forecast released today by The Senior Citizens League.
TSCL’s COLA model predicts that the 2026 Social Security cost of living adjustment will come in at 2.1%, down from its initial forecast of 2.5% released back in December.
The updated forecast is based on this morning’s announcement from the Bureau of Labor Statistics, which showed the CPI-W (the index used to calculate the COLA) came in at 2.8% in December 2024.
Each month, TSCL issues a new prediction of the next COLA for Social Security using our statistical model. The model incorporates the Consumer Price Index, the Federal Reserve interest rate, and the national unemployment rate. The model’s predictions update throughout the year, adjusting in response to economic conditions. TSCL released a new version of the model, v1.2, in January 2025. The new version updates the model’s use of dates, processing data according to the federal fiscal year instead of the calendar year. The new model also reduces each prediction’s reliance on previous predictions made throughout the federal fiscal year.
As shown in the chart below, 2025’s COLA was just 2.5%, down from 3.2% in 2024 and a whopping 8.7% in 2023. The last time the COLA came in below 2.0% was 2021, when it was 1.3% due to low inflation during 2020.
If SSA announced the 2026 COLA today, using data from October to December instead of July to September, TSCL said it would come in at 2.6%.
This downward trend for COLAs comes amid a period of serious financial struggle for American seniors: TSCL survey data suggest that two-thirds (67%) of seniors depend on Social Security for more than half their income. And 62% of older Americans worry that their retirement income won’t even cover essentials like groceries and medical bills.
The Senior Citizens League says that while slowing inflation is a good thing, it doesn’t mean prices will fall—just that they’ll rise more slowly. This leaves many seniors facing a budget shortfall, and is why TSCL supports President Elect Trump’s campaign promise of eliminating taxes on Social Security benefits.
“The Trump Administration’s plan to eliminate taxes on Social Security benefits would make a massive difference,” said TSCL Executive Director Shannon Benton in a statement today. “The current thresholds used to determine if you’ll pay taxes on your benefits were set up back in the 1980s, and we’ve never adjusted them for inflation.”
TSCL estimates that eliminating the tax on Social Security benefits could save a typical senior about $3,000 a year, which the organization says comes out to about 5% of a typical senior budget.
While Trump’s pledge to end taxation of Social Security benefits would help many seniors in the short term, without an offset (none has been provided by the Trump camp to date), doing so would also hasten Social Security’s looming insolvency.
According to the most recent Social Security Board of Trustees annual report released in May 2024, the Social Security trust fund will become depleted in 2033 absent congressional action—at which time only 79% of scheduled benefits would be payable.
If the tax on Social Security benefits were to end without an offset, a recent estimate by the nonpartisan Committee for a Responsible Federal Budget (CRFB) found that insolvency window would shrink to only 6 years—by 2031 instead of 2033. Under CRFB’s central estimate, ending the income taxation of Social Security benefits would add about $950 billion to Social Security’s cash deficit between FY 2026 and 2035.
SEE ALSO:
• Initial 2026 Social Security COLA Prediction: 2.5%
• Second Trump Presidency: End of Tax on Social Security Benefits?
• EDITOR’S NOTE: This article has been updated to reflect the latest Social Security COLA forecast. The previous article about the official 2025 Social Security COLA announcement appears below.
Social Security beneficiaries will see a lower cost-of-living adjustment (COLA) for 2025, as the Social Security Administration (SSA) released this morning a finalized adjustment of 2.5% following cooled inflation in the third quarter of 2024.
On average, Social Security retirement benefits for 72.5 million Americans will increase by about $50 per month starting in January.
“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” said Martin O’Malley, commissioner of Social Security.
Nearly 68 million Social Security beneficiaries will see a 2.5% COLA beginning in January 2025. Increased payments to nearly 7.5 million people receiving Supplemental Security Income (SSI) will begin on December 31, 2024.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) is slated to increase to $176,100 from $168,600.
The news follows the latest CPI-W numbers from the Bureau of Labor Statistics (BLS) this morning at 2.2%, after hovering near or above 3% for most of the year.
Retirees pessimistic amid higher living costs
This year’s COLA is smaller than in recent years, compared to 2024’s moderate 3.2% and 2022’s high of 8.7%. Over the last decade, the Social Security COLA has averaged at about 2.6%.
Americans say they’re experiencing the effects of the dwindling adjustment. A report from the AARP found that only 16% of Americans ages 50 and over agree that “a cost-of-living adjustment of less than 3% for Social Security recipients is enough to keep up with rising prices.”
“Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income,” said AARP’s CEO Jo Ann Jenkins, in a statement. “Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills. Social Security is the primary source of income for 40% of older Americans.”
Independent Social Security and Medicare policy analyst Mary Johnson, who releases her own COLA predictions and analyses each month, reiterated the frustrated sentiment among retirees. Johnson, who is also retired, says the new adjustment is barely enough for retirees to buy a few days’ worth of groceries. “With average retiree benefits rising by about $48 per month, that’s only going to buy about 14 gallons of gasoline per month at today’s prices, or maybe enough groceries for one to last two or three days,” said Johnson.
Shannon Benton, executive director with The Senior Citizens League (TSCL), added that the adjustment hasn’t kept pace with real increases in day-to-day living costs, leaving retirees calling on policymakers for change while struggling to maintain a standard of living. A recent TSCL survey of more than 3,000 older Americans found that 72% said that changing the COLA calculation to an index that better reflects seniors’ changing costs should be a top priority for Congress. Additionally, 70% said they worry that persistently high inflation prices will cause them to raise their spending and risk depleting their retirement savings and other assets.
“Our research shows that 67 percent of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won’t even cover essentials like groceries and medical bills,” said Benton. “Seniors are frustrated that the CPI-W fails to measure inflation as they experience it.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
