Retirement Social Security

The Simple Formula Change That Could Mean Bigger Social Security Raises for Millions

Social Security recipients could gain a lot if lawmakers make a key program adjustment.

By Chris Lewis, CEPF , Edited by Laura Hohenstein

Updated Sept. 30, 2026

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No matter what your retirement plans consist of, there's a good chance Social Security will play a big role in them once your career comes to an end. This especially holds true if you're someone who struggles to save money for retirement and will be heavily dependent on those benefits to cover your future living costs.

Now, one nice thing about Social Security is that those benefits have built-in inflation protection.

Each year, senior benefits are eligible for a cost-of-living adjustment, or COLA, that's tied to inflation directly. The problem is that those COLAs don't always do what they're intended to do: help seniors on Social Security maintain their buying power year after year.

One proposal seeks to change the way Social Security COLAs are calculated, and if Congress tweaks the formula, it could result in more meaningful raises for beneficiaries in future years.

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The problem with Social Security's COLA formula

Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When COLAs became automatic, the CPI-W was the only version of the consumer price index available at the time (though back then, it was simply called the Consumer Price Index). The Bureau of Labor Statistics (BLS) changed its name in 1978.

In 1978, the BLS also created the Consumer Price Index for All Urban Consumers (CPI-U) to cover more of the population. Despite that broader coverage, the CPI-U was not adopted as the method of calculating Social Security COLAs.

Meanwhile, critics of the current system argue that the CPI-W does not accurately reflect the costs faced by seniors on Social Security and should therefore not be used as the index for COLA calculations. Specifically, Social Security recipients tend to spend more money on health care than the broader population, and health care prices generally rise faster than inflation overall. So, sticking with the CPI-W inevitably leads to smaller COLAs.

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The formula advocates want to use instead

In 1982, the BLS introduced the Consumer Price Index for the Elderly, or CPI-E, which is a research index that tracks the spending patterns of people ages 62 and over. Senior advocates have argued that the CPI-E better represents the costs incurred by Social Security recipients and should be used to measure COLAs for better accuracy.

The Senior Citizens League says it recommends using the CPI-E as a research index to determine the Social Security COLA calculation. Doing so could add more than $12,000 to lifetime benefits for the average person who retired in 2024 over the course of a 25-year retirement.

The group also says that Social Security benefits lost about 13.7% of their buying power between 2016 and 2026 and are now worth about 86 cents on the dollar compared to a decade ago. To restore their value to 2016 levels, Social Security benefits would need to rise 15.8%, or $295.85 per month, for the average recipient.

The group's proposal sits in the Social Security Expansion Act, which was introduced in the House in February, 2025. However, it hasn't seen any action on the floor.

Why the current system really stings

A big reason the current COLA formula is such a problem is that seniors on Social Security pay their Medicare Part B premiums directly out of their monthly benefits. But seniors have seen some big increases in the cost of Part B in recent years.

In 2026, the standard monthly Medicare Part B premium rose from $185 a month to $202.90 per month. That's a roughly 9.7% increase. Social Security benefits, meanwhile, only rose 2.8% in 2026. In other words, the cost of Medicare Part B rose about 3.5 times as fast as the COLA Social Security recipients got.

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What seniors can do in the meantime

For now, the CPI-W is the formula being used to calculate Social Security COLAs. And because of the flaws in that system, it's important for beneficiaries to have other ways to keep up with inflation.

One option is to choose the right investments. Stocks tend to outpace broad inflation in terms of growth, so investing in a variety of individual stocks or broad market exchange-traded funds could be a good way to stay ahead of rising costs in retirement.

Of course, not everyone is able to save for retirement and put that money into inflation-beating investments. Retirees struggling with the current COLA formula may want to seek out part-time work to boost their paychecks.

Bottom line

Social Security COLAs are supposed to help beneficiaries maintain their buying power as inflation drives living costs up over time. But clearly, they don't always do a good job of keeping pace with inflation.

If you're in the process of planning for retirement, it's important to understand that Social Security may not give you the inflation protection you're hoping for. Rather than bank too heavily on those benefits, it's important to build savings for retirement so you're not only able to eliminate some stress living on Social Security, but also have a way to choose investments that can beat inflation in the long run.

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