Social Security cost-of-living adjustment for 2026: Why some retirees ‘wish it would be more’ – CNBC

Report on Social Security Adjustments and Alignment with Sustainable Development Goals

A forthcoming announcement regarding the 2026 Cost-of-Living Adjustment (COLA) for Social Security and Supplemental Security Income beneficiaries highlights critical intersections with several United Nations Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 3 (Good Health and Well-being), and SDG 10 (Reduced Inequalities).

SDG 1: No Poverty – The Role of COLA as a Social Protection Floor

Social Security serves as a primary social protection system for nearly 75 million Americans, directly contributing to the SDG 1 target of implementing nationally appropriate social protection systems and measures for all. The annual COLA is a mechanism designed to shield beneficiaries from poverty by adjusting benefits to match inflation.

• Projected Adjustment: The estimated COLA for 2026 is between 2.7% and 2.8%, which would increase the average monthly retirement benefit by approximately $54.
• Beneficiary Concerns: Despite this adjustment, beneficiaries report that the increase is insufficient to cover rising costs for essential goods and services, including food, rent, and utilities. This challenges the effectiveness of the social protection floor in ensuring a basic standard of living.
• Historical Context: Recent COLAs have been modest (3.2% in 2024, 2.5% in 2025) compared to the 8.7% adjustment in 2023, reflecting a decrease in the overall inflation rate. However, the cumulative cost of living for retirees continues to outpace these adjustments.

SDG 3 & SDG 10: Health, Well-being, and Reduced Inequalities

The method for calculating the COLA has significant implications for reducing inequality (SDG 10) and ensuring healthy lives (SDG 3), as the economic realities of older adults often differ from those of the general population.

Inflation Measurement and Its Impact on Vulnerable Groups

The current formula’s adequacy in reflecting the true cost increases for seniors is a central issue. Research indicates that retiree spending has increased at a 3.6% annual rate from 2000 to 2023, while the general consumer price index rose by only 2.6%.

1. Current Metric (CPI-W): The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers. Critics argue this index does not adequately represent the spending patterns of retirees, who allocate a larger portion of their income to healthcare.
2. Proposed Alternative (CPI-E): Advocacy groups support switching to the Consumer Price Index for the Elderly, which places greater emphasis on medical care and housing. This change would more accurately reflect the financial pressures on older adults, better supporting SDG 3 and SDG 10. Adopting the CPI-E is estimated to increase annual COLAs by approximately 0.2 percentage points.
3. Alternative Proposal (Chained CPI): Another proposal suggests using the Chained CPI, which accounts for consumer substitution. This would likely reduce future COLAs by about 0.3 percentage points, potentially exacerbating poverty and inequality among beneficiaries.

According to AARP research, even with the COLA, 77% of older adults report difficulties covering basic expenses, a situation that directly threatens their health and well-being.

Systemic Sustainability and Long-Term Economic Viability

The long-term financial stability of the Social Security system is crucial for its role in sustainable economic planning and social support, aligning with principles of SDG 8 (Decent Work and Economic Growth).

• Trust Fund Solvency: Social Security’s trust funds are projected to be depleted by 2034, after which only 81% of promised benefits will be payable without legislative changes.
• Policy Proposals for Sustainability: Policy discussions include modifying the COLA formula and other structural reforms. One proposal involves limiting the size of COLAs for the highest-earning beneficiaries, which could close approximately one-tenth of the system’s solvency gap while protecting the most vulnerable recipients.

The debate over the COLA calculation method underscores the challenge of balancing inflation protection for beneficiaries with the long-term fiscal sustainability of the Social Security program, a cornerstone of the nation’s commitment to the Sustainable Development Goals.

Analysis of the Article in Relation to Sustainable Development Goals

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 1: No Poverty
   • The article directly relates to SDG 1 by discussing the financial stability of nearly 75 million Social Security beneficiaries, many of whom are older adults. It highlights how these benefits are essential for covering basic expenses like healthcare, rent, and food. The central theme is the adequacy of the cost-of-living adjustment (COLA) in preventing poverty among this vulnerable population, as expressed by a retiree who states the projected increase “won’t do anything” against rising costs.
2. SDG 10: Reduced Inequalities
   • The article addresses SDG 10 by focusing on the economic well-being of a specific demographic group: older persons. It examines whether the primary social protection policy for this group, Social Security, effectively mitigates the economic inequality caused by inflation. The discussion about different inflation measures (CPI-W vs. CPI-E) is a debate about creating a more equitable system that accurately reflects the economic realities faced by the elderly, thus promoting their economic inclusion.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 1 (No Poverty)
   • Target 1.3: Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable.
     • The article is centered on the U.S. Social Security system, a key national social protection system. It discusses the implementation of this system through the annual COLA, which acts as a measure to protect the purchasing power of beneficiaries, a group identified as vulnerable. The mention of “Nearly 75 million beneficiaries” directly speaks to the coverage aspect of this target.
2. Under SDG 10 (Reduced Inequalities)
   • Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age…
     • The article’s focus on retirees and the adequacy of their benefits is directly linked to the economic inclusion of older persons. The COLA is a mechanism designed to ensure they are not left behind economically due to inflation. The AARP CEO’s statement that the COLA is a “lifeline of independence and dignity” for older Americans reinforces its role in promoting their social and economic inclusion.
   • Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality.
     • The entire article is an analysis of a social protection policy (Social Security COLA). It evaluates its effectiveness and discusses proposals for reform, such as using the CPI-E or Chained CPI, to better align the policy with the goal of achieving greater economic equality for retirees whose living costs may be rising faster than the general inflation rate.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For Target 1.3 (Social Protection Systems)
   • Coverage of the social protection system: The article states that “Nearly 75 million beneficiaries” receive Social Security and Supplemental Security Income, serving as a direct indicator of the population covered by this system.
   • Adequacy of benefits: The article implies a need to measure the adequacy of benefits. The AARP research finding that “77% of older adults still face challenges covering basic expenses” even with the COLA is a powerful indicator that the benefit levels may be inadequate to prevent financial hardship.
2. For Target 10.4 (Social Protection Policies for Equality)
   • Annual cost-of-living adjustment (COLA) percentage: The article provides specific figures for the COLA (e.g., 8.7% in 2023, 3.2% in 2024, and a projected 2.7%-2.8% for 2026). This percentage is a key performance indicator of the policy’s responsiveness to inflation.
   • Inflation measurement metrics: The article discusses various consumer price indices (CPI-W, CPI-E, Chained CPI). The choice of index is an indicator of how the policy is tailored to the specific economic experiences of the target group (retirees).
   • Discrepancy between retiree costs and inflation: The research from Goldman Sachs Asset Management showing that retirees’ spending increased at a 3.6% annual rate while the CPI went up by 2.6% from 2000 to 2023 is a critical indicator of the policy’s effectiveness gap.

4. Table of SDGs, Targets, and Indicators

Source: cnbc.com