"The 2.8% Social Security cost-of-living adjustment that took effect in January 2026 initially looked like good news. With overall inflation running at 2.7% in December, the COLA appeared to provide a small cushion. But for many retirees, the national inflation average doesn't tell the whole story. The goods and services retirees depend on most-healthcare, groceries, utilities-are rising faster than the headline number suggests, and that gap could quietly erode purchasing power over time."
"The most important factor isn't the COLA itself, but how it compares to the specific categories where retirees spend heavily. Walmart's 30% stock gain over the past year tells an important story about grocery pricing power. The retailer's ability to raise prices on household essentials-categories where retirees spend heavily and can't easily cut back-demonstrates why the national inflation average may understate real cost pressures for fixed-income households."
"The dividend income many retirees depend on faces its own inflation problem. AT&T offers a 4.5% yield but hasn't raised its payout in four years, meaning that income stream buys less each year. Duke Energy does grow its 3.6% dividend, but at just 1.9% annually-creating a widening gap against even modest cost increases."
A 2.8% Social Security COLA barely outpaces headline inflation, but many retirees face faster price growth in essential categories such as healthcare, groceries, and utilities. Retail pricing power, illustrated by Walmart's large stock gain, signals that staples remain costly and hard to cut from fixed budgets. Utility rate hikes and rising healthcare premiums hit fixed-income households directly. Dividend income also lags: some high-yield payers do not raise payouts, while dividend growers increase distributions slowly, creating a persistent gap between income and retirees' cost-of-living increases.
Read at 24/7 Wall St.
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