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The new projected Social Security cost-of-living adjustment for 2026 has inched up to 2.7%, slightly higher than a previous projection of 2.4%—which would have been the smallest increase since 2021. While the modest bump is welcome news to seniors dependent on social security payments, it may still fall far short of what many they need to keep up with their expenses.
For the millions of older adults living on fixed incomes, even a small shift in Social Security expectations can carry big consequences—especially as housing costs continue to rise.
Home insurance premiums are surging across the country, often driven by climate risk and insurer pullouts. Property taxes are placing growing pressure on longtime homeowners in states with rapidly appreciating real estate. And utilities, particularly electricity, are expected to keep climbing through 2026, according to projections from the U.S. Energy Information Administration.
Put simply: While you may see a bigger social security check, it might not keep pace with the rising costs of homeownership.
What is the 2026 Social Security COLA?
The cost-of-living (COLA) adjustment is the annual increase applied to Social Security benefits to help recipients keep pace with inflation. It’s calculated by comparing third-quarter data from the consumer price index for Urban Wage Earners and Clerical Workers (CPI-W) with the same period the previous year. If prices rise, benefits go up. If they don’t, the adjustment could be minimal—or even zero.
For 2026, early estimates had suggested just a 2.4% increase—down slightly from 2.5% in 2025 and significantly lower than the double-digit increases seen earlier in the decade. It would mark the smallest COLA in five years.
But new data about rising inflation has bumped that forecast up to 2.7%.
It’s both good and bad news for seniors: While a larger COLA means more money in their pockets, it also means that the costs of living have gone up. To make matters more complicated, inflation rates aren’t spread evenly across sectors. Utilities, for example, are an essential cost of homeownership, yet they have risen at almost double the national inflation rate, according to Utility Dive.
That disconnect leaves older homeowners with a growing gap between what their benefits cover and what staying in their homes actually costs.
The final 2026 COLA will be officially announced by the Social Security Administration in October, once third-quarter inflation data is complete. But for now, the projections are already prompting concern—particularly among retirees whose largest expenses are tied to housing.
Senior deduction offers hope
The modest bump in COLA might pale in comparison to the potential savings from a new $6,000 senior deduction. Signed into law this year by President Donald Trump, it fulfills his campaign pledge to effectively end taxes on Social Security.
While the deduction won’t eliminate Social Security taxes entirely, it gives seniors another tool to reduce their taxable income—stacking on top of the standard or itemized deductions they already claim.
For homeowners still paying federal income taxes, but struggling with rising costs to stay in their homes, this could offer meaningful relief.
Why this matters for boomer homeowners
For baby boomer homeowners, especially those already retired or planning to retire soon, Social Security is more than a safety net—it’s often their main source of stable income. That’s especially true for younger retirees, who now rely on the program more heavily than their older cohorts, according to recent data from the Employee Benefit Research Institute. Among retirees aged 62 to 63, Social Security accounts for nearly 67% of their total income, compared with 52% for retirees in their mid-70s.
This growing dependency reflects a broader trend: the decline of traditional pensions, the uneven success of 401(k) savings, and economic volatility that’s left many approaching retirement without a strong financial cushion. For those homeowners, annual COLA adjustments are a financial lifeline, not a bonus. And when those adjustments come in lower than expected, it can throw carefully planned budgets off course.
“From a tax standpoint, a smaller COLA, meaning less of an increase in Social Security benefits, reduces predictable income growth for retirees,” says Paul Miller, managing partner and CPA at CPA Firm New York.
“This may nudge many toward downsizing to minimize property tax burdens and unlock home equity, which could be partially or fully tax-free if the home sale qualifies under the Section 121 [capital gains] exclusion.”
And yet, many retirees are still carrying mortgages—a number that’s only grown in recent years. According to LendingTree, more than 10.5 million homes in the U.S. are owned by people over 65 with an active mortgage. For these households, every dollar counts. Even a small dip in expected income can trigger tough questions about whether they can continue to afford their homes.
Put simply, for a growing number of retirees, Social Security isn’t just part of the retirement equation—it is the equation. And when COLA increases lag behind the cost of living, housing becomes one of the first places that financial strain shows up.
The real-world budget impact
A 2.7% COLA on a $2,000 monthly Social Security check comes out to just $54 more per month. For retirees facing steady increases in home insurance, property taxes, or utility bills, that extra income might not stretch far—if at all.
For some, the gap between benefit growth and rising expenses could lead to difficult trade-offs: postponing roof repairs, skipping HVAC servicing, or appealing property tax assessments just to preserve monthly cash flow. But those short-term savings often come at a long-term cost.
“Delaying home maintenance may seem cost-effective short term, but significant repairs may later need to be funded from retirement accounts,” explains Miller. “If those withdrawals come from traditional IRAs or 401(k)s, they are taxable and could push retirees into higher tax brackets, affect Medicare premiums, or trigger the net investment income tax.”
How lower COLAs could influence housing decisions
When Social Security benefits don’t keep pace with housing-related costs, many older homeowners are forced to rethink how and where they want to live. A lower COLA might be a tipping point, nudging boomers toward decisions they might have otherwise postponed.
Some might downsize earlier than planned to reduce property taxes and utility bills. For those with significant home equity but limited liquid assets, reverse mortgages may become more appealing as a way to access cash without incurring additional tax liabilities.
“Refinancing becomes less attractive when rates are high or stable, but for retirees still holding older, higher-interest mortgages, tapping into lower rates even via a reverse mortgage could create liquidity without triggering taxable income,” says Miller.
Beyond individual households, these decisions ripple outward. Seniors might delay moving into retirement communities or assisted living—not because they want to, but because they simply can’t afford to.
“Lower COLAs can slow seniors’ transitions into retirement communities or assisted living, as monthly costs for those services rise while benefits stagnate,” Miller explains. “This delay creates ripple effects: Inventory for larger homes may remain tight, while demand for more affordable senior housing and aging-in-place retrofits increases.”
In other words, a modest adjustment to Social Security benefits can have an outsized influence on housing supply, demand, and affordability, especially in aging communities.
What it means for fixed-income retirees in high-cost areas
For older homeowners in high-cost states like New York, New Jersey, and California, a low or middling COLA magnifies long-standing affordability challenges tied to local tax policy.
In these states, property taxes and other municipal fees have steadily climbed, while federal tax relief has remained limited.
“In high-tax states (e.g., California, New Jersey, New York), a low COLA can reduce the ability of retirees to absorb property tax hikes or rising municipal fees,” says Miller. “Fixed-income retirees may find themselves inching closer to exceeding the SALT (state and local tax) deduction cap, offering less federal tax relief.”
But, this year, President Trump signed legislation to raise that cap, giving high-tax state homeowners more breathing room. The SALT cap, once just $10,000, now stands at $40,000, giving additional relief for those who qualify.
But deductions only help retirees who owe enough in income taxes to use them. For many who’ve lived in the same home for decades, rising property values and costs collide with flat or modest incomes, creating a painful squeeze.
Some may consider selling to reduce their tax burden, while others might turn to state property tax deferral programs or local circuit-breaker credits where available. Either way, a muted COLA leaves little margin for absorbing big bills in high-cost markets, especially when housing remains the largest expense in the budget.