Why a COLA Needs To Be Sweeter

Our COLA story starts in 1940 when, at 65, Ida Mae Fuller was the first U.S. retiree to get a Social Security check for $22.54. In 1941, she got $22.54 each month. In 1942, 1943, and 1944 she still got her $22.54. Until 1950, she received $22.54 a month.

Although every check said $22.54, she wasn’t really getting the same amount. In 1949, Ida Mae needed a monthly payment of $38.32 to retain her purchasing power.

So, in 1950, realizing that inflation had cut what beneficiaries could buy, the Congress gave us Social Security Cost-of-Living Adjustments (COLAs). Since then, at first through special legislation and then automatically based on the CPI, Social Security payments usually rise annually.

Social Security COLAS

Starting next January, bringing the average to $2088, our monthly Social Security payments will be approximately $75 more than they were during August 2026.

Social Security COLAS by year, since 2017:

As a 3.6% boost, the 2027 COLA (Cost of Living Adjustment) is supposed to at least equal the annual inflation rate that is an average of the CPI’s inflation rate for July, August, and September.

With a September CPI 12-month increase of 3.7%,  it did not.

What Seniors Spend

Illustrating generational spending differences, the following graphic compares share-of-income spending.

During 2024, our 65+ grandparents spent a whoppingly larger share of their income on Housing and more on Food than their children and grandchildren:

Our Bottom Line: Inflation Inequality

Because seniors do not spend like the rest of us and depend more on Social Security, we can ask if Social Security COLAs should be calculated differently.

Knowing that housing prices fed inflation’s march upward, we can hypothesize its impact on seniors.

The cumulative increase in housing prices exceeded the overall CPI:

We should add that because our conclusions depend on the numbers we select, we also went directly to FRED. Between August 2008 and August 2026, the CPI was up 36% while housing moved past it with a 40% overall increase.

CPI:

CPI Housing

So, should Social Security COLAS focus solely on senior spending?

My sources and more: For up-to-date Social Security numbers and Social Security history,  we can look at WSJ and the SSA, here and here.  From there, you might also enjoy taking a look at the BLS experimental CPI-E for the elderly.

Please note that several of today’s sentences were in a previous econlife post. Also, we did not point out energy’s impact on the CPI. Although seniors’ transportation spending is relatively smaller, diesel price increases still hit all of us in multiple ways.