Social Security beneficiaries depend on annual cost-of-living adjustments (COLAs) to keep up with rising prices across the economy. The 2026 COLA, which will be announced in a few months, is a particularly high-stakes event because most retired workers believe the last two COLAs weren't big enough, according to research from The Motley Fool.
Read on to see the latest forecasts and learn why the 2026 COLA may once again fall short of expectations.
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How Social Security's cost-of-living adjustments (COLAs) are calculated
Social Security benefits are adjusted annually to compensate beneficiaries for inflation. Those cost-of-living adjustments (COLAs) are tied to a subset of the Consumer Price Index known as the CPI-W, which tracks price changes based on the spending habits of urban households that receive most of their income from clerical or wage occupations.
The math is simple: The CPI-W from the third quarter of the current year (i.e., July to September) is divided by the CPI-W from the third quarter of the prior year. The percent increase becomes the COLA in the next year. For instance, the CPI-W increased 2.5% in the third quarter of 2024, so Social Security benefits received a 2.5% COLA in 2025.
The Bureau of Labor Statistics will announce September CPI-W data on Oct. 15, at 8:30 a.m. ET. The Social Security Administration will announce the official 2026 COLA later that same day.
The most recent forecasts says Social Security's 2026 COLA will range between 2.4% and 2.7%
The Senior Citizens League (TSCL), a nonprofit advocacy group, has upwardly revised its 2026 COLA forecast multiple times since January because inflation has stayed higher than originally anticipated. As of July, TSCL estimates Social Security benefits will increase 2.6% next year.
In June, the Social Security Board of Trustees included an updated COLA forecast in their annual report on the program's financial status. The trustees estimate Social Security payouts will rise 2.7% next year. And the Congressional Budget Office updated its forecast in January, estimating benefits will increase 2.4% next year.
The chart below shows the average benefit for retired workers, spouses, survivors, and disabled workers as of June 2025. It also shows what the average benefit would be after a 2.4% COLA and a 2.7% COLA. In other words, it shows the smallest and largest possible increases in benefits, based on the latest COLA forecasts.
|
Beneficiary Type |
Average Benefit June 2025 |
Average Benefit After 2.4% COLA |
Average Benefit After 2.7% COLA |
|---|---|---|---|
|
Retired worker |
$2,005 |
$2,053 |
$2,059 |
|
Spouse of retired worker |
$953 |
$976 |
$979 |
|
Survivor |
$1,571 |
$1,609 |
$1,613 |
|
Disabled worker |
$1,582 |
$1,620 |
$1,625 |
Data source: Social Security Administration.
As shown above, the latest COLA forecasts suggest the average monthly retired-worker benefit will range from $2,053 to $2,059 in 2026, which is $48 to $54 more than the average payout in June 2025. Of course, readers should remember that estimates are subject to change. The official COLA depends on how CPI-W inflation trends through September.
Why Social Security's 2026 COLA may not be big enough
The CPI-W measures how prices change over time, based on the spending habits of urban workers who earn an hourly wage. That's problematic because workers tend to be younger than seniors on Social Security, and those groups spend money differently. For instance, retired workers spend more on housing and medical care.
In other words, from the perspective of retirees, the CPI-W understates the importance of those expenditures. Unfortunately, housing and medical-care costs are rising more quickly than the overall CPI-W this year, which means the 2026 COLA is on pace to underestimate the pricing pressures facing Social Security beneficiaries. Details are provided below:
- CPI-W inflation measured 2.4% year to date through June.
- Medical-care inflation measured 2.8% year to date through June.
- Housing inflation measured 3.9% year to date through June.
Here's the big picture: Inflation in spending categories most important to retired workers is running hotter than overall CPI-W inflation. If that trend persists through the third quarter, Social Security's 2026 COLA will be too small, in which case, benefits will lose purchasing power next year. Similar events played out in the last two years, which likely explains why most retirees felt the last two COLAs were insufficient.
