We're less than three months away from arguably the most important news of the year for Social Security beneficiaries. I'm referring, of course, to the Social Security Administration's mid-October announcement of the 2026 cost-of-living adjustment (COLA).
Are you wondering what to expect for next year's Social Security COLA? Here's what history says could be coming in 2026.
Image source: Getty Images.
Ending the downward COLA trend
Anyone who has received Social Security benefits for a few years knows that the COLA has been on a downward trajectory. In 2023, the annual increase was 8.7%, its highest level in more than four decades. The COLA fell to 3.2% the following year and continued to slide to 2.5% last year.
What does history show about what usually happens next after two consecutive years of declining Social Security COLAs? There's a pattern of breaking the trend.
Automatic annual COLAs have been in effect since 1975. Before then, a Social Security benefits increase literally required an act of Congress. During the period of automatic annual COLAs, there have been nine times when the COLA declined for two consecutive years. In seven of those cases -- nearly 78% of the time -- the COLA increased in the next year.
By the way, that's what The Senior Citizens League (TSCL), a nonprofit organization that advocates for seniors, predicts will happen in 2026. TSCL updates its statistical model each month using the latest inflation data, the Federal Reserve's interest rate, and the national unemployment rate. Its most recent projection is for a COLA next year of 2.6%, which is slightly above last year's 2.5% increase.
Digging deeper
Although TSCL uses several data points in its model, the annual Social Security COLA is based only on inflation numbers. In particular, the Social Security Administration calculates the percentage difference between the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year and the same quarter of the previous year. The agency then rounds the difference to the nearest one-tenth of 1% to set the COLA.
In the second quarter of 2025, the average CPI-W was around 2.3% higher than in the prior-year period. TSCL obviously expects inflation in the third quarter of this year will accelerate. But is that what has typically occurred in the past?
I asked ChatGPT (using GPT-4.1, by the way) to crunch the numbers using historical CPI-W data going back to 1975. It determined that the third-quarter year-over-year percentage difference in CPI-W was greater than the second-quarter year-over-year percentage difference 19 times but was lower 30 times.
Historically speaking, it's more likely that inflation improves in the third quarter compared to the second quarter. If this pattern repeats itself in 2025, Social Security beneficiaries could expect a COLA that's either the same or lower than they received last year.
The present trumps the past
If you're not getting a warm and fuzzy feeling from looking back at history to figure out what to expect with next year's COLA, I don't blame you! Depending on which set of historical data is used, we get different answers. I don't think history is a great guide in this case.
Instead of looking at the past to get a feel for what the 2026 Social Security COLA will be, looking at the present could be a better approach. The latest inflation numbers were the highest since February. The Federal Reserve is balking at cutting interest rates because it's concerned that tariffs could cause prices to rise in the coming months. The Trump administration has stated it will impose steep tariffs on countries that haven't negotiated trade deals with the U.S. by Aug. 1.
With all of this in mind, the chances that next year's COLA will be higher than the 2.5% increase received in 2025 seem to be pretty good. The bad news is that it means retirees and other Social Security beneficiaries might have to pay higher prices on products well before they receive any benefit increase.
