No more full Social Security COLA for millions of US seniors? New proposal reveals possible key to stabilize program. But here's who gets hurt

In a white paper published in October that cites calculations by the Urban Institute, the organization says the proposed change “could be a rapid, thoughtful, and progressive way to help restore solvency and put Social Security on a sustainable path.”

But, if implemented, this shift could make it difficult for some beneficiaries to sustain their purchasing power later in retirement.

Here’s a closer look at why this change is being proposed and how it could impact your retirement plans.

What is COLA?

COLA is a mechanism built into the Social Security system that helps protect beneficiaries from the impact of inflation.

Initially, these adjustments were done on an ad-hoc basis and needed congressional approval. But when inflation flared up in the 1970s, Congress enacted a provision to allow for automatic annual COLAs. Since then, the annual COLA is linked to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an official measure of the monthly price change in a basket of goods and services, such as food, energy and medical care.

For 2026, the Social Security Administration pegged COLA at 2.8%. This adjustment will benefit all 75 million beneficiaries of the program.

Under the CRFB’s new proposal, all beneficiaries will still benefit from an annual COLA. However, retirees with the largest benefits — and typically the highest lifetime earnings — will face a fixed dollar amount cap on their annual COLA.

So if COLA is 2% in a given year, someone who receives $50,000 in total annual benefits would typically see a $1,000 bump, but would now face a potential cap at $900 instead. Beneficiaries earning less than $45,000 would still see the full adjustment.

This cap can be calculated in a variety of ways, and for its white paper, the CRFB suggested setting the cap at the COLA received by the 75th percentile beneficiary based on their primary insurance amount (PIA) — the benefit a retiree would receive if they claimed at their full retirement age (FRA).

“As with the benefit itself, the cap would be adjusted upward or downward based on collection age,” explained the paper. “For example, the cap would be reduced by 30% for those who began collecting at age 62 and increased by 24% for those who began collecting at age 70. Similarly, the cap would be adjusted for benefit type. For example, it would be half as high for a spousal benefit.”

In 2055, benefits would be 6% lower for the top quintile, including 7% lower for the top 5% of earners.

Why is a change being proposed?

The CRFB’s proposal may seem radical, but it reflects the real risk of cuts that all beneficiaries currently face.

With recent tax cuts and deductions from the One Big Beautiful Bill Act (OBBBA) taken into account, Social Security’s retirement and disability trust funds combined are expected to be depleted by early 2034. At that time, there would be sufficient income coming in to pay just 81% of scheduled benefits. Considered alone, the retired worker’s trust fund depletion date is late 2032, at which time 77% of benefits will be payable.