Social Security beneficiaries expected to get bigger cost-of-living-adjustment in 2026

Social Security beneficiaries are likely to receive a larger cost of living adjustment (COLA) next year after the latest inflation data show price pressures persisting, according to a new report.

Social Security’s COLA is calculated using a variant of CPI data that measures average annual inflation for the months of July, August and September – meaning the final COLA for 2026 will be unveiled after September’s CPI print is released in mid-October.

The Bureau of Labor Statistics on Thursday released the consumer price index (CPI) for August, which showed headline inflation rising from 2.8% in July to 2.9% last month on a year-over-year basis. Headline CPI rose 0.4% for the month of August.

With the latest data in hand, The Senior Citizens League (TSCL) estimated that the Social Security COLA will be 2.7% when it’s announced next month – which would raise the average monthly benefit for retired workers by $54 from $2,008 to $2,062.

A BIG CHANGE IS COMING FOR SOCIAL SECURITY RECIPIENTS AT THE END OF SEPTEMBER

TSCL noted that its latest estimate is higher than what was projected at the outset of this year, when it estimated there would be a 2.1% COLA, because “inflation is substantially higher” than its model anticipated. 

It also noted that a COLA of 2.7% would be roughly average from a historical standpoint, as the annual benefit adjustments have averaged 2.6% over the last 20 years. The highest COLA was 8.7% in 2023, while the lowest were in 2010 and 2011 when the COLA was 0.0%.

INFLATION REMAINED STUBBORNLY HIGH IN AUGUST AS FED WEIGHS RATE CUTS

TSCL Executive Director Shannon Benton noted that the group’s research shows that “many seniors believe inflation is much higher than the COLA estimates,” and that about 80% of seniors thought inflation last year was substantially higher than the 2.5% COLA implemented at the start of this year.

The nonpartisan Committee for a Responsible Federal Budget (CRFB) developed its own forecast for Social Security’s 2026 COLA, which estimates the annual inflation adjustment will be slightly higher at 2.8%.

“For many people, Social Security is the only inflation-protected income they have in retirement,” said Bill Sweeney, AARP’s senior vice president of government affairs. “The COLA allows America’s seniors to keep us as everyday costs continue to rise – from groceries to housing to prescription drugs.”