It is no news that the continuous and exponential growth of inflation is affecting the way and quality of life of Americans. The Cost of Living Adjustment (COLA), a Social Security tool to mitigate this rise, seems to be insufficient to meet the needs of the population, especially retirees, according to The Senior Citizens League. The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), but only takes into account the spending patterns of people of working age.
This poses a problem, as while the CPI-W rose by 2.4% in the first half of 2025, expenses on housing and health among retirees rose by 3.9% and 2.8%, respectively. On the other hand, the hiring freeze in federal agencies instituted by Trump makes it difficult for the accuracy of surveys measuring inflation to be reliable. According to The Wall Street Journal, this adds another barrier for the COLA to not reflect the reality of prices. As noted by the Employee Benefit Research Institute, there is evidence of the ineffectiveness of the COLA for retirees, as they do not feel secure about having enough money to live comfortably for the rest of their lives.
Cost of Live Adjustment, COLA
The COLA is the tool used by the Social Security Administration (SSA) to determine the percentage by which to increase the amounts of social assistance for beneficiaries. The COLA’s function is to mitigate the effects of inflation being experienced at that moment in the U.S. economy, ensuring the purchasing power of beneficiaries, as well as their quality of life. How is it calculated?
Very easily. Social Security compares the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year with the same period of the previous year. The difference between the two will be the amount that constitutes the COLA for the following year. It is always applied in January and ends in December, corresponding to a fiscal year.
Inflation and retirees
The current problem with inflation and COLA percentages is that they are not sufficient to meet the needs of citizens, particularly retirees. According to The Senior Citizens League, since 2010 the purchasing power of retirees has been reduced as COLA increases have not been enough to mitigate the effects of inflation. Where is the problem? It lies in the fact that CPI-W is being calculated based on data from working-age people, without considering retirees. This has been reflected in the CPI-W increase of the first half of 2025 at 2.4%, compared to the rise in housing and health costs faced by retirees, at 3.9% and 2.8%, respectively.
Other factors that matter
According to specialists, a COLA increase of between 2.6% and 2.7% is expected for 2026, which is far from sufficient for the actual expenses of retirees. Another factor complicating the situation is the hiring freeze ordered by Trump in federal agencies. This leads to inaccuracies in the surveys used to measure inflation. As The Wall Street Journal warns, “This introduces another factor that may cause the COLA not to reflect the reality of prices”.
What does the future hold?
Retirees find themselves in a situation of total economic insecurity and lack of protection, to which the Trump administration turns a deaf ear. Experts from the Employee Benefit Research Institute have conducted surveys among affected retirees, of which only a third consider themselves ‘very sure’ of having enough economic capacity to live comfortably for the rest of their lives. This worrying data reflects how the majority of the retired population fears for their economic stability and directly suffers the consequences of inflation in their day-to-day lives. We have to wait until October to know the official figures and the rest of the measures that will be approved by the Social Security Administration (SSA).