The vast majority of seniors are heavily reliant on Social Security to make ends meet in retirement. In a survey conducted by the advocacy group The Senior Citizens League last year, over two-thirds of respondents said they rely on Social Security for at least half of their income. And 27% said it was their only source of income in retirement.
As such, the annual cost-of-living adjustment, or COLA, is of utmost importance to most retirees. It helps the bulk of their income to keep up with inflation. So far in 2025, inflation has continued to run high despite efforts by the Federal Reserve to push it lower. While we won't have an exact number until October, analysts expect the 2026 COLA to come in around 2.6% or 2.7%.
But the Social Security Board of Trustees laid out different scenarios for seniors earlier this year in its annual report. And if inflation remains stubborn, recipients could be in store for an even bigger raise next year in their COLA.
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When will Social Security announce the 2026 COLA?
Congress automated Social Security COLAs in the 1970s, tying the annual increases to a measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers (the CPI-W).
The Bureau of Labor Statistics is responsible for collecting the necessary data and publishing the CPI-W every month. It collects thousands of data points from around the country on the prices of over 200 items. It then weights each of those prices relative to what percent of spending it represents for the typical urban wage earner or clerical worker.
The annual COLA is based on just three months of data: July, August, and September. The average year-over-year increase in the CPI-W during those months turns into the COLA for the following year.
Since the BLS typically releases the numbers one to two weeks after the month ends, we'll have an official COLA sometime in mid-October each year. The Social Security Administration says it will publish the number on Oct. 15 this year. Retirees will get a notice in December, and their next check in January will reflect that COLA.
Here's the scenario for the highest COLA
When the Social Security Board of Trustees lays out its projections for the health of its trust fund, it includes a high-cost, low-cost, and intermediate projection for all sorts of factors that could affect the program.
The trust fund is currently facing a shortfall because it has paid out more in benefits than it collected in tax revenue for each of the last four years. Moreover, the gap between revenue and expenditures is widening as more baby boomers retire each year and people live longer.
As such, the Board of Trustees estimates it will deplete the Old-Age and Survivors Insurance Trust Fund by 2033. At that point, it will only be able to pay out a fraction of the benefits due from the trust fund.
One of the biggest factors affecting the health of the program is inflation, which impacts the COLA, as detailed above. The best-case scenario for the program is higher inflation, which will result in a higher COLA. While it would mean the program has to pay out more in benefits, it also means wages will likely follow inflation, and it can collect even more in revenue than the increased payout.
In its 2025 Trustees' Report, the Board said its low-cost estimate for next year's COLA is 3%. That would require a surge in inflation in July, August, and September, after climbing 2.6% in June. That said, there are a number of factors that could lead to higher inflation this summer, including the implementation of tariffs on many imports starting Aug. 1.
But a higher COLA isn't necessarily good news for seniors who are heavily reliant on Social Security income in retirement. More often than not, retirees get the short end of the stick when the CPI-W climbs faster than average, and the COLA fails to keep up with the actual rise in costs for the average senior.
Seniors often spend a higher percentage of their income on things like healthcare and housing. Healthcare prices are rising so much these days that many seniors may not even see an increase in their monthly benefits next year as Medicare Part B premiums completely eat away at the COLA. Most retirees are better off with slow and steady inflation, resulting in a lower COLA.
Even if a higher COLA is better for the health of Social Security, it's not necessarily what most seniors should be hoping for.
