This is a crucial time of the year for retirees who receive Social Security benefits. Each fall, the Social Security Administration (SSA) issues a cost-of-living adjustment, or COLA, to account for inflation's impact on living expenses. What happens in the economy this summer will determine what next year's COLA looks like.
The latest forecast from The Senior Citizens League calls for a 3.8% COLA this year. That's not an official number, but it does signal that retirees may see a larger increase than last year's 2.8%. Here are some factors retirees should watch before the formal COLA announcement later this year.
The numbers that actually matter
The SSA bases the COLA on the performance of the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, in July, August, and September of each year. The SSA averages the CPI-W's value over those three months and compares it to the same months of the prior year. In 2025, the index averaged 317.265 in the third quarter, which drove that 2.8% COLA.
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Rather than focusing on headline inflation numbers in the news, retirees should keep their eye on the index. To get a 3.8% COLA, the CPI-W would need to average approximately 329.321. The SSA will announce the index's July average next month, kicking off that crucial three-month window. It was at 327.075 in June, the most recent number at the time of writing this article.
World events could drive expenses higher
The war in Iran is a potential wildcard here. Disruptions to traffic through the Strait of Hormuz have driven up oil and gas prices, affecting prices retirees pay at the pump, for food, and elsewhere. Meanwhile, rising electricity prices could also factor into the CPI-W over the next several months. The ongoing data center boom is straining the electrical grid.
Remember, the COLA only looks at three months of data. So, for example, if the war ended in October and gas prices plummeted, the COLA calculation wouldn't reflect that. It's all about what happens from July through September.
The COLA is only part of the equation
Based on a rough average monthly Social Security retirement benefit of $2,000, a 3.8% COLA would add approximately $76 to a retiree's monthly finances. It doesn't take much, a new subscription here, or an extra restaurant meal there, to burn through that increase. The COLA is an adjustment, so it won't drastically alter your retirement lifestyle.
Additionally, there are other factors to consider. A retiree enrolled in Medicare Part B is probably paying their premiums from their monthly benefit. The 2026 Medicare Trustees Report estimates that the standard Part B premium will increase by $6.60 per month in 2027, which alone offsets nearly a tenth of a 3.8% COLA.
Retirees should hope for the highest possible COLA while planning for a lower one. For many retirees who are financially struggling, every dollar matters.
