Estimates for the next cost-of-living adjustment to Social Security moved downward this week as new consumer price index data showed inflation cooling to 2.4%.
Inflation fell to the lowest level in four years, with the numbers coming in under what Wall Street had forecasted ahead of Thursday’s Bureau of Labor Statistics report. With the annual inflation rate dropping, Mary Johnson, an independent Social Security analyst, now predicts a 2.2% COLA for 2026.
That would be lower than the 2025 COLA of 2.5%.
Older Americans relying on Social Security benefits often keep a close eye on inflation and government reports. For one thing, people with fixed incomes tend to be especially sensitive to price increases. The rate of inflation also determines the COLA, which is the annual change to Social Security benefits intended to offset inflation.
The annual COLA is calculated based on third-quarter inflation data, which means numbers from July, August and September will determine next year’s final adjustment.
In a note Thursday, Johnson explained that the exact index used to calculate the COLA, known as the CPI-W, reported an inflation rate of 2.2% in March, down from 3.0% in January.
Johnson said she is worried about the impact of recent years’ inflation on retirement nest eggs. The average Social Security retirement benefit is $1,976, but many older Americans feel their benefits are insufficient with how high prices have climbed for groceries, health care and other expenses.
“Higher sticky consumer prices, home repairs [and] changes in health are forcing older consumers to spend more from savings at a faster rate, at the same time extreme stock market volatility pummels the value of retirement account holdings,” Johnson added.
How Trump’s tariffs could affect the COLA
Another new estimate from the Senior Citizens League, an advocacy group for older Americans, estimates the 2026 COLA will be 2.3%, roughly in line with Johnson’s analysis.
But if inflation rises due to tariffs, a growing concern among economists, COLA forecasting models based on CPI-W data could soon suggest larger increases in Social Security payments.
“While this would increase the COLA,” the league wrote in a news release, “it would also put seniors under financial pressure as prices rise.”
Johnson, too, added a word of caution to her report.
“This forecast, however, may underestimate the final 2026 COLA because Trump administration tariffs would raise consumer prices,” she said. “A trade war with China or higher tariffs with other trading partners would cause higher inflation. That could push COLAs higher, as well.”
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