The Federal Reserve cut rates to 3.5%-3.75% in December 2025, signaling lower inflation expectations and a projected 2027 COLA between 2.3% and 2.6%. Social Security benefits have lost 20% of their buying power since 2010 due to underestimated retiree inflation.

The rate cut has big implications for the economy, impacting borrowing costs, savings account rates, and the stock market. Social Security retirees should pay attention to these decisions as they could affect Cost of Living Adjustments (COLAs). Benefits have lost buying power due to COLAs underestimating inflation.

Retirees may receive a 2.8% COLA in 2026, based on CPI-W changes, but the Fed’s rate cut suggests a smaller raise in 2027. The Fed’s decision to lower rates for the third time in a row supports estimates of a smaller COLA in 2027, with a projected range between 2.3% and 2.6%.

The Fed’s rate cut is both good and bad news for seniors, affecting COLA and savings account returns. Lower inflation concerns could be positive for retirees. Americans underestimate retirement needs, but adopting a specific habit can more than double savings without increasing income or cutting back on lifestyle.

Read more at Yahoo Finance: The Fed’s December Rate Cut Brings Bad News and Good News On the Social Security COLA