Your Social Security paycheck might see smaller COLA adjustments in the future

The cost of living adjustment (COLA) won't be as high as it is now in a year's time.

PUBLISHED JAN 9, 2026

The Social Security Administration office. (Cover Image Source: Photo by Justin Sullivan | Getty Images)

The U.S. Federal Reserve slashed interest rates three times in the last four months of 2025, a measure that was hailed by the public and the Donald Trump administration. However, it may not repeat the feat in 2026, and that could have an impact on Social Security payments in 2027. The US Fed indicated that cuts in the future could be paused, which could indirectly lead to a lower Social Security cost-of-living adjustment (COLA) in 2027, according to a Newsweek report.

Representative image of a Social Security administrative office. (Image credit: Getty Images | Photo by Veronique D) — Representative image of a Social Security administrative office. (Image source: Getty Images | Photo by Veronique D)

The reason behind this is something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The report states that the Fed’s benchmark rate will range from 3.5% to 3.75% in 2026, a 0.75 percentage point drop from the 4.25% to 4.50% target range it had set in January. The decisions of the Fed are taken into account by the CPI-W.

This index is used to measure inflation and determine the COLA for next year’s Social Security payments, according to the report. As per estimates, the COLA for 2027 could be as low as 2.1%. In 2026, that was set at 2.8% after 2.5% in 2025. This marked drop means that more than 70 million Social Security beneficiaries face lower COLA adjustments. As a result, the rise in the amount they receive through Social Security checks won't be the same as it was in 2026 and 2025.

A protester demonstrates against a Bush administration in June 18, 2001 | Getty Images | Photo by Spencer Platt — Representative image of a demonstrator. (Image source: Getty Images | Photo by Spencer Platt)

“While many Americans are celebrating the Fed finally starting to lower rates from the highs they rose to in the post-pandemic years, that also can come with a surprise for Social Security recipients,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, said. “The COLA rise in recent years has been significant due to ongoing inflationary pressures that drove interest rates higher. Now that those same rates are falling, that also could equate to a smaller COLA adjustment in the checks millions of seniors receive.”

However, a lower COLA adjustment should also signify lower inflation and lower expenses in the long run. Whether that will come true is yet to be seen. The administration is urging the Fed to cut interest rates even more, but this could lead to a high inflation rate. It would not bode well for the seniors whose Social Security checks would not be in line with the rising prices in the economy.

Representative Image Source: Getty Images | Chip Somodevilla — Representative Image of Fed Chair Jerome Powell. (Image Source: Getty Images | Chip Somodevilla)

"CPI measures the rate of inflation, not the level of prices. So even if your COLA goes up, that doesn’t mean prices are coming down. It just means they’re rising more slowly off of already higher levels,” 9i Capital Group CEO Kevin Thompson said.

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