We should soon find out what the 2026 Social Security cost-of-living adjustment (COLA) will be. The Social Security Administration will announce the exact details when the Bureau of Labor Statistics releases the September inflation report.
The annual COLA is designed to help Social Security benefits keep up with rising prices. As such, it's been tied to a standard measure of inflation since the mid-1970s. With stubborn inflation rates so far this year, retirees could be in for another relatively high COLA. But there's an unfortunate truth everyone receiving Social Security benefits needs to be aware of about the 2026 COLA.
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How big a benefits boost will beneficiaries receive?
The COLA is based on the average inflation experienced during the third quarter of the year (July through September). After the release of August's inflation numbers, analysts were able to update their models with new estimates.
Most estimates converge around 2.7% or 2.8%. If the 2026 COLA comes in above 2.5%, it'll be the fifth year in a row of a COLA of at least that much. The last time that happened was in 1997.
The previous four years have resulted in some super-sized bumps in Social Security payments. Total COLAs in that time amounted to over 20%. The average Social Security retired worker beneficiary now receives over $2,000 per month in benefits.
Unfortunately, though, that $2,000 doesn't go as far as it used to. For seniors, it might be worth even less than it was just half a decade ago. Next year's COLA could suffer from a similar problem.
The unfortunate truth about the 2026 Social Security COLA
While the COLA is meant to help seniors keep up with rising costs, the current method for doing so hasn't done a very good job. More than half of respondents in a survey conducted by The Motley Fool said the 2025 COLA was somewhat or completely insufficient. The data backs up their sentiment.
As mentioned, inflation has remained stubborn throughout 2025. While beneficiaries received a 2.5% COLA last year, prices have climbed higher faster than that almost every month this year. Moreover, the costs of high spending categories for seniors, such as food, shelter, and medical services, have all climbed as fast as or faster than the overall inflation rate this year.
As a result, beneficiaries have experienced a decline in their purchasing power this year as more of their monthly payments go toward their necessities. That's not unique to 2025, either. The Senior Citizens League estimates that Social Security beneficiaries who began receiving payments in 2010 saw the purchasing power of those monthly benefits decline 20% between 2010 and 2024.
That trend could continue in 2026. Even with a 2.7% or 2.8% COLA coming down the pipeline, seniors are likely to experience costs that rise much faster than that. One cost that seems nearly certain to increase faster than the COLA rate is Medicare Part B premiums. The Board of Trustees estimated it'll have to raise base level Part B premiums for Medicare a whopping 11.6% next year. For many seniors, that $206 estimated premium will come right out of their Social Security payments.
The other factor that could lead to higher costs for seniors is the implementation and enforcement of tariffs. Data suggests that U.S. companies have mostly borne the brunt of the cost of tariffs so far. But economists expect that trend could change over the longer term as businesses raise pricing and consumers end up paying the increased cost for imported goods.
Unfortunately, inflation looks likely to take a bigger bite out of benefits than the COLA will offset.
