"The issue comes down to how COLA is calculated and what expenses matter most in retirement. Social Security uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. This index tracks spending patterns of working Americans under age 62, not retirees. The calculation compares third-quarter averages from one year to the next, and the SSA announces the result every October."
"Medicare Part B premiums illustrate the problem. The monthly premium jumped to $202.90 in 2026, a 10% increase from the prior year. This single expense consumed a significant portion of the 2.8% COLA before beneficiaries could address any other rising costs, demonstrating how healthcare inflation creates unique pressure on senior budgets that general inflation measures don't fully capture. Housing costs for seniors have climbed around 4% annually in recent years, consistently outpacing COLA adjustments."
Social Security calculates the annual COLA using the CPI-W, which reflects spending by working Americans under 62 rather than retirees. Retiree budgets allocate much more to healthcare and housing, but those areas carry less weight in CPI-W, producing a mismatch between COLA and seniors' true cost pressures. A 10% increase in Medicare Part B premiums in 2026 raised monthly costs to $202.90, consuming much of the 2.8% COLA and limiting spending power. Housing costs have climbed about 4% annually and an experimental BLS index for 62+ consistently rises faster than CPI-W.
Read at 24/7 Wall St.
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