The Flat-Rate Social Security COLA: A Cut By Any Other Name

Each year the Social Security Administration (SSA) adjusts Social Security benefits for changes in the cost of living to protect beneficiaries from inflation and preserve the purchasing power of monthly benefit checks.

A proposal that is attracting attention after the Washington Post editorial board embraced it last month would fundamentally change how Social Security calculates the annual cost-of-living adjustment (COLA). Rather than keeping pace with inflation, 80% of beneficiaries would see the purchasing power of their benefits erode year after year, leaving many in or near poverty.

Social Security protects beneficiaries from inflation

Since 1975, Social Security benefits have automatically adjusted for changes in the cost of living. Every October SSA computes the percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in the third quarter compared to the same period in the previous year. The following January, every beneficiary’s monthly payment is increased by that percentage increase, which is called the COLA.

The COLA, which has averaged 3.7% since 1975, peaked at 14.3% for benefits payable in July 1980. It is set to zero if the CPI-W falls or doesn’t change over the period, which has happened three times. The most recent COLA, for benefits payable in January 2026, was 2.8%.

A flat-rate COLA cut

The Committee for a Responsible Federal Budget (CRFB) recently elevated a proposal to replace the existing COLA with a flat dollar amount adjustment. Under this so-called flat-rate COLA proposal, SSA would compute the COLA percentage as it always has. Rather than applying that COLA percentage to everyone’s benefits, however, the proposal would convert the COLA into a flat dollar amount calculated by multiplying the COLA percentage by the dollar value of benefits received by someone at the 20^th percentile of the benefit distribution. Every beneficiary would receive that dollar increase, meaning that 80% of beneficiaries would receive a smaller adjustment than they do now.

Because monthly Social Security benefits vary widely among beneficiaries, this proposal would significantly cut the COLA for many people. Social Security replaces a portion of workers’ earnings after they retire or become disabled. Benefits increase with average lifetime earnings, but the benefit formula is progressive, so benefits replace a larger share of earnings for low-wage workers than high-wage workers. In 2025, the 20^th-percentile benefit was $1,223 per month, the 90^th-percentile benefit was $3,247, and the average benefit was $2,071.

As shown in Table 1, if the flat-rate proposal had been in effect, the average retired worker would have received a “COLA” of $34.20 per month in 2026 rather than the $57.90 they did receive. This would have covered a 1.7% inflation rate, well below the actual 2.8% increase in prices. The average beneficiary would have lost purchasing power, so the adjustment would not qualify as a true COLA. The proposal would have cost the average beneficiary $285 over the course of the year.

Source: AARP Public Policy Institute calculations, based on data from SSA’s Statistical Supplement to the Social Security Bulletin.
Notes: We estimated the monthly flat-rate COLA for 2026 at $34.20, 2.8% of $1,223, the 20^th percentile of the retired worker benefit distribution. The COLA is rounded down to the nearest $0.10. The estimated COLA would have been smaller if we had based it on the distribution of all Social Security beneficiaries instead of retired workers. Estimates are for beneficiaries receiving the average retired worker benefit in 2025.

The flat-rate COLA would hit the oldest beneficiaries hardest

The impact of the flat-rate COLA grows rapidly over time. Consider a worker who retired in 1998 at age 65 and began collecting the average annual new retiree benefit that year of $11,200. Keeping pace with inflation, the annual benefit for this retiree grew to $22,600 at age 93 (in 2026) (Figure 1). If a flat-rate COLA had been in effect since 1998, their annual benefit at age 93 would have amounted to only $18,000, a shortfall of $4,600, or 20%. Cumulative losses over the course of their retirement would have reached $77,900 (in 2026 inflation-adjusted dollars). 

Source: AARP Public Policy Institute calculations based on data from multiple years of SSA’s Statistical Supplement to the Social Security Bulletin. 
Notes: The actual COLA sets the annual adjustment equal to the change in the CPI-W multiplied by the previous year’s full benefit. The flat-rate COLA would set the adjustment equal to the change in the CPI-W multiplied by the previous year’s benefit received by the beneficiary at the 20^th percentile of the benefit distribution. The analysis assumes that beneficiaries began collecting benefits in 1998 at age 65 and received that year the average retired worker benefit for new 65-year-old beneficiaries.

For 80% of beneficiaries, the flat-rate COLA would erode the inflation protection that Social Security has always provided, and the impact would grow as people age. Between ages 65 and 93, inflation would have eroded 28% of the purchasing value of the benefit received by our hypothetical 1998 retirees under the flat-rate COLA. Their 2026 check could cover less than three-quarters of the goods and services—including groceries, rent, and medical care—that their 1998 check covered.

The proposal would intensify financial hardship for many people in their 80s and 90s and for people who have been disabled for decades

Social Security anchors older adults’ financial security, so any benefit reduction can create significant financial hardship. Fully 20% of adults ages 65 and older rely on Social Security for at least 90% of their income, including 29% of Black adults. Nearly 60% of adults ages 75 and older do not have any retirement savings.

Many retirees are already struggling financially. In January 2026, 30% of retirees who responded to AARP’s Financial Security Trends Survey said they were very or somewhat worried about having enough money to cover basic expenses, and 52% worried about their ability to pay for a large, unexpected expense. Even with the existing COLA in place, 64% said they worried about prices rising faster than their income. Limiting the Social Security COLA would compound these financial anxieties.

Because the impact of COLA cuts multiplies over time, a flat-rate COLA would intensify financial hardship for many people in their 80s and 90s and for people who develop disabilities at relatively young ages. 

• A woman who retired at age 65 in 1998 and collected the average retired worker benefit awarded to a woman that year receives an annual benefit at age 93 of $18,100, 13% above the $15,960 poverty line for a single person. Under the flat-rate COLA, her age-93 annual benefit would fall to $15,800, just below the poverty line.
• A man who was seriously injured in a traffic accident at age 36 in 1998 and collected the average disabled worker benefit awarded to a man that year receives an annual benefit at age 64 (in 2026) of $17,000, 7% above the poverty line. Under the flat-rate COLA, his age-64 annual benefit would fall to $15,200, 5% below the poverty line.

Poverty rates are already twice as high for people with disabilities than for those without disabilities, and people ages 80 and older are more likely to experience poverty than younger Social Security beneficiaries. The oldest beneficiaries are also likely to develop expensive health problems, often facing high out-of-pocket costs for medical care and long-term services and supports. And they are more likely to have depleted their retirement savings than younger people.

Cutting Social Security’s COLA is not the way to reduce program spending

Social Security’s COLA is an essential element of the nation’s retirement income system and a key part of the promise of Social Security. By increasing payments each year based on the change in prices, the existing COLA formula preserves the purchasing power of Social Security benefits, ensuring that inflation does not erode beneficiaries’ living standards, especially those who have been collecting benefits for decades. For most older adults and people with disabilities, Social Security provides the only inflation protection they have. A flat-rate COLA that limits inflation-related increases to the dollar amount received by those receiving small benefits would significantly cut benefits for most people in their 80s and 90s and those who have received disability benefits for decades—weakening the lifelong financial security that Social Security has always provided retirees and people with disabilities.