Understanding your annual Social Security Cost-of-Living Adjustment (COLA) is vital for financial planning, especially for the millions of Americans who rely on these benefits. Data indicates that between 80% and 90% of retirees depend on Social Security for some or a major portion of their income. The COLA is designed to help your benefits keep pace with inflation, protecting your purchasing power year after year.
Since 1975, the Social Security Administration has calculated the COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This calculation compares the average CPI-W readings from the third quarter (July through September) of the current year to the same period in the previous year.
Following a decade of minimal or no increases in the 2010s, beneficiaries have seen higher COLAs in recent years. The adjustments for 2022 through 2025 were 5.9%, 8.7%, 3.2%, and 2.5% respectively, largely reflecting the surge in inflation that followed the COVID-19 pandemic. The average annual COLA since 2010 has been 2.3%.
What’s the Latest 2026 COLA Estimate?
Initial forecasts for the 2026 Social Security COLA earlier this year, such as those from nonpartisan senior advocacy group The Senior Citizens League (TSCL) and independent analyst Mary Johnson, projected a 2.2% increase.
However, following the release of the U.S. Bureau of Labor Statistics’ May inflation report, these estimates have been slightly revised upward. Both TSCL and Mary Johnson now forecast a 2.5% COLA for 2026.
This 0.3% increase in the forecast has been referred to as a “Trump bump.” The modest upward revision is attributed by some analysis to potential inflationary effects stemming from President Donald Trump’s tariff and trade policies, including global import duties and higher reciprocal tariff rates.
How Might This Affect Your Monthly Benefit?
A 2.5% Cost-of-Living Adjustment in 2026 could translate into a noticeable increase in monthly Social Security benefits for many recipients. Based on average benefit amounts:
The average retired worker could see an increase of approximately $50 per month.
The typical worker receiving disability benefits might see their payment rise by about $40 per month.
- Survivor beneficiaries could receive around $39 more per month.
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This forecast represents a potential fifth consecutive year with an above-average COLA compared to the trend since 2010.
The Persistent Challenge: CPI-W vs. Senior Expenses
While a 2.5% COLA and the recent “bump” are positive, experts highlight a significant issue with how the COLA is calculated that continues to impact seniors. The CPI-W, the index used, tracks the spending habits of urban wage earners and clerical workers. This demographic has different spending priorities than most Social Security beneficiaries, who are predominantly aged 62 and older.
Working-age individuals typically spend more on areas like transportation, apparel, and education. Seniors, however, allocate a disproportionately larger share of their budgets to crucial expenses like shelter and medical care services.
Because the CPI-W does not give adequate weight to the costs of shelter and medical care, the calculated COLA often falls short of the actual inflation experienced by retirees. For example, the May BLS report showed that trailing-12-month inflation rates for shelter (3.9%) and medical care services (3%) both exceeded the current 2.5% forecast for the 2026 COLA.
This mismatch has led to a significant erosion of purchasing power over time. According to a TSCL study, the buying power of a Social Security dollar has decreased by 20% since 2010.
Ultimately, while the forecast for the 2026 COLA has seen a slight increase attributed to external economic factors, this modest rise is considered insufficient to counteract the long-term decline in purchasing power faced by seniors due to the inherent flaw in the COLA calculation method. Beneficiaries will need to wait until the official third-quarter inflation data is released later this year for the final, confirmed 2026 COLA figure.
