Retiring on Social Security alone is not the best idea. That's because those monthly benefits won't even replace half of your former paycheck. And most seniors can only afford so much of a reduction in income.
Still, the reality is that many seniors do end up retiring on just Social Security because they find it difficult to save for their later years on their own. And people in that situation tend to become very reliant on Social Security's annual cost-of-living adjustments (COLAs) to stay afloat.
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The purpose of Social Security COLAs is to help seniors maintain their buying power as inflation drives living costs upward. In 2025, Social Security benefits received a 2.5% COLA. And many retirees are no doubt wondering what 2026's raise will amount to.
Unfortunately, it's too soon to give an answer. But August should get us closer to one. Here's why.
Why August matters for Social Security
Social Security COLAs are tied directly to inflation. When the general cost of living rises, Social Security benefits go up. When there's no increase in inflation, or a decrease, Social Security benefits stay the same and do not get a COLA.
There have been several instances in the past where seniors' benefits did not increase from one year to the next. But Social Security benefits thankfully cannot decrease from one year to another.
The specific index Social Security COLAs are based on is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It tracks changes in the price of common goods and services.
But COLAs are calculated based on CPI-W numbers from the third quarter of the year -- meaning, July, August, and September. So while inflation data from previous months can give a clue as to what sort of COLA Social Security might be in store for, the months that really count are the three just mentioned.
As such, the way inflation trends in August will have a huge impact on next year's Social Security raise. Similarly, in mid-August, the Bureau of Labor Statistics is set to release its CPI-W data from July. So that should give an even stronger clue as to what might be in store for 2026.
Should seniors on Social Security be banking on a big raise?
Because inflation has been fairly moderate so far this year, there's a chance that next year's Social Security COLA won't be so substantial. However, tariffs could shake things up in August and lead to higher prices. That could, in turn, result in a larger Social Security COLA.
However, that's not necessarily something seniors should want. Higher living costs could push many retirees to the point where they truly have to start making hard spending choices. So in some regards, it may almost be better for Social Security recipients to get a smaller COLA in 2026.
Of course, it can also be argued that things will even each other out either way. If next year's Social Security COLA is larger, it can help offset higher costs. If it's smaller, it'll mean that costs haven't risen so drastically.
Still, psychologically, Social Security recipients tend to want a large COLA. Whether they'll get one is yet to be determined, but by the midpoint of the month, they should know a bit more.
