AARP sends strong message on Social Security, inflation | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

As American workers plan for retirement, they confront numerous challenges to their financial future.

Affordability has been a big topic of conversation, and the recent history of inflation difficulties naturally rises to the surface.

One way the U.S. government reacts and responds to the challenge of helping retirees succeed in their battle to handle rising prices is to provide a cost-of-living adjustment (COLA) to people’s Social Security monthly benefits, which average about $2,000, according to the Social Security Administration (SSA).

For 2026, COLA will increase by 2.8%.

“On average, Social Security retirement benefits will increase by about $56 per month starting in January,” the SSA shared in a statement. “Over the last decade the cost-of-living adjustment (COLA) increase has averaged about 3.1 percent. The COLA was 2.5 percent in 2025.”

On Dec. 18, it was reported that the Consumer Price Index (CPI) rose 2.7% over the past 12 months, according to the U.S. Bureau of Labor Statistics.

Advocacy group AARP, which champions concerns of Americans more than 50 years old, weighs in.

AARP explains COLA and inflation

AARP says that the cost-of-living adjustment could be the most broadly anticipated item for Social Security recipients.

But it’s not the only thing to think about.

“Inflation, wage trends and new policies directly affect not just the more than 68 million people receiving Social Security benefits but also the estimated 184 million workers (and future beneficiaries) paying into the system,” AARP wrote.

“Social Security field offices are changing how they do business, and millions of retirees will no longer see their benefits reduced because they also get a government pension.”

AARP describes cause of inflation, history

Inflation can be described as a situation where the amount of money in circulation grows faster than the supply of goods and services available to purchase, according to AARP.
When the economy expands rapidly — often due to very low unemployment, significant government spending, or both — consumers have more money to spend, which pushes prices upward. Employers then raise wages to keep pace with rising costs, adding further pressure on prices.
In the late 1960s, unemployment dropped to 3.4%, and inflation climbed to nearly 6%.
Inflation can also increase when a major resource becomes scarce. A sharp reduction in the supply of a critical material, such as oil, can cause prices to surge.
In 1973, the oil embargo drastically cut oil supplies. Long lines formed at gas stations, and in 1974 the federal government introduced a 55‑mile‑per‑hour speed limit to conserve fuel. The Consumer Price Index (CPI) rose 6.2% in 1973 and 11 percent in 1974.
During the Covid pandemic, oil companies reduced production significantly, though output has since recovered.
Wars frequently contribute to inflation. In 1918, during World War I, the CPI increased 18% due to shortages of items ranging from canned food to copper.
In 1942, as World War II intensified, the CPI rose 10.9%.
The Vietnam War period saw a combination of rapid economic growth and heavy government spending, which triggered another major inflation cycle. The CPI rose 13.5% in 1980 and averaged an annual increase of 8.5% from 1972 to 1981.

AARP clarifies Social Security facts in 2026

Beyond the COLA adjustments to Social Security, there is a Medicare premium hike for people to consider, according to the Centers on Medicare and Medicaid.

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Social Security beneficiaries have other new federal policies to understand.

“The developments are driven by new federal policies and economic shifts, such as inflation and income trends, that affect the more than 70 million people receiving Social Security benefits, as well as the estimated 185 million workers (and future beneficiaries) paying into the system,” AARP wrote.

AARP highlights Social Security in 2026

An AARP survey found that 77% of older adults believe a 3% COLA increase for Social Security monthly paychecks for 2026 will not keep pace with rising costs.
Since 2000, the average COLA has been about 2.6%, even with the unusually high increases of 5.9% in 2022 and 8.7% in 2023.
COLA adjustments apply to retirement, survivor, family, and SSDI benefits, as well as SSI for older adults and people with disabilities who have low incomes and limited assets.
Medicare Part B premiums will rise in January 2026 from $185 to $202.90, a 9.7% increase, according to the AARP.
Most enrollees pay this standard premium through deductions from Social Security, reducing the net effect of the COLA by $17.90 per month.
Social Security is funded by a 12.4% payroll tax, split between workers and employers.
The taxable wage cap will rise to $184,500 in 2026, up from $176,100 in 2025.
A new deduction for people 65 and older will reduce taxable income by up to $6,000 starting in 2026.
Full eligibility applies to individuals with MAGI up to $75,000 and couples up to $150,000, with reduced deductions available at higher incomes.
This temporary deduction, ending after 2028, will reduce trust fund revenue and move projected depletion from early 2033 to late 2032.
In 2026, beneficiaries below full retirement age will have $1 withheld for every $2 earned above $24,480.