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Social Security is a popular but expensive program. With the trust fund facing depletion in just a few years, experts have suggested different ways to cut costs and make the program more sustainable, including raising the full retirement age or eliminating the payroll tax cap for high-income earners.
Now, the Committee for a Responsible Federal Budget (CRFB), a bipartisan nonprofit, is adding another innovative solution to the mix: limiting cost-of-living adjustments (COLA) for the highest-income earners (1).
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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% (2). 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 (3). 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.
By focusing on high-income earners, the CRFB argues it is limiting the cuts to only those who can most afford it, while preserving the system for middle- and low-income retirees who need the COLA more.
According to its estimates, imposing a hard cap on the top 25% of Social Security beneficiaries could save $115 billion over 10 years, nearly 10% of the program’s 75-year funding shortfall. Alternatively, if the cap applies at the 50th percentile, half of all beneficiaries would face a limit on their COLA adjustment and the system would save $385 billion over a decade.
The think tank acknowledges that a COLA cap would do little to delay insolvency on its own and other reforms will be needed. However, since it would improve solvency, it would shrink the coming cut and actually increase payable benefits by about 2% for those in the bottom three quintiles.
What comes next
It doesn’t seem like lawmakers have commented on the CRFB’s proposal, suggesting it hasn’t drawn much attention in Washington. Nevertheless, the trust fund’s depletion is looming just seven years away, and the Social Security program enjoys broad public support (93% of U.S. adults consider it a valuable federal program), which means Congress will likely need to act soon (4).
Taxpayers can expect some mix of adjustments or reforms, whether through higher revenues, slower benefit growth or structural tweaks, as politicians aim to avoid an abrupt reduction in payments.
Prepare your finances now
Whether you’re already retired or just getting started with your career, these reforms will likely impact you.
Changes to the program may mean smaller benefits, delayed payouts or adjustments to eligibility — all of which could leave future retirees needing to fill a bigger income gap on their own.
Getting professional guidance can help you stay ahead of that risk.
A financial advisor can walk you through how possible reforms may affect your expected benefits and help you build a financial plan to compensate if there’s a shortfall. That could mean boosting retirement contributions, rebalancing your portfolio or finding additional sources of passive income.
You can easily connect with a vetted FINRA/SEC-registered financial advisor near you for free through Advisor.com.
All you have to do is answer a few questions about your financial situation, and Advisor.com will connect you with a qualified expert. And every advisor on their network is a fiduciary — so they’re legally obligated to act in your best interests.
But hiring a financial advisor can be a lifelong commitment — that’s why Advisor.com lets you set up a free initial consultation with no obligation to hire so you can see if your match is the right fit before making a decision.
Take advantage of helpful resources
Understanding how and when to claim Social Security can make a big difference in how much you receive over time. But with rules around eligibility, spousal benefits and delayed retirement credits, the system can feel overwhelming.
That’s where organizations like AARP can help.
AARP members get access to guides that can help you make the most of Social Security, choose the right Medicare plan, and uncover other government benefits — potentially saving you thousands.
As an AARP member, you can get discounts on almost everything — from prescriptions and dental plans to travel, entertainment and insurance.
Sign up for AARP today to get 25% off your first year.
Invest in inflation-proof assets
Building a portfolio that can withstand inflation is another way to protect your finances. Certain assets have historically performed well during periods of rising prices, helping investors preserve their purchasing power.
Gold, for example, has long been viewed as a hedge against inflation. Because it isn’t tied to the performance of any single currency or economy, gold is often regarded as a store of value when purchasing power is reduced.
One way to invest in gold that can also provide significant tax advantages is to open a gold IRA with Goldco, which allows you to invest in physical gold and silver.
With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver.
Download your free gold and silver information guide today to learn more.
Invest in real estate
Real estate can also provide a useful hedge. As construction costs and land prices increase, home values often follow suit — which means rent tends to rise as well, giving investors a source of income that is more likely to keep up with inflation.
The good news is that investing in residential real estate no longer requires taking on a mortgage, saving for a large down payment or managing tenants.
Platforms like Arrived allow you to invest in shares of vacation and rental properties across the country with as little as $100.
To get started, just browse their selection of vetted properties, each chosen for their appreciation and income-generating potential.
Arrived distributes any rental income generated by properties to investors monthly, meaning you could potentially earn passive income without all the extra work that comes with being a landlord.
And for a limited time, when you open an account and add $1,000 or more, Arrived will even credit your account with a 1% match.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Committee for a Responsible Federal Budget (1); Social Security Administration (2), (3); Bipartisan Policy Center (4)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.