Personal Finance

Prediction: This Is What the 2026 COLA Will Be for Social Security Benefits

Maurie Backman

Published: January 20, 2025 9:41 am

It’s not uncommon for seniors on Social Security to collect those benefits for two decades or longer. But in that long a time frame, the value of a dollar can seriously erode due to inflation.

That’s why Social Security’s automatic cost-of-living adjustments, or COLAs, play such a crucial role in seniors’ finances. Thanks to COLAs, benefits are adjusted each year to account for inflation so that seniors don’t automatically lose out on buying power over time.

In 2025, Social Security’s COLA came to 2.5%, which is the smallest COLA to arrive in years after a period of rampant inflation. And even though the new year has just begun, many seniors are no doubt eager to get a sense of what their 2026 COLA might look like.

Based on economic data, it’s possible to venture a guess about next year’s COLA at this point. But do know that it’s also much too soon to lock in a number definitively.

How Social Security COLAs are calculated

Social Security COLAs are based on third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, a subset of the more well-known Consumer Price Index, or CPI. The CPI measures changes in the cost of goods and services.

The reason 2025’s Social Security COLA was considerably smaller than previous ones is that inflation cooled nicely in 2024. In fact, inflation dipped to a moderate enough level for the Federal Reserve to begin cutting its benchmark interest rate late last year.

But in December, inflation crept upward slightly. Last month’s CPI rose 2.9% on an annual basis. And that’s actually not great news for Social Security recipients, because if that trend continues, it means their 2025 COLA won’t keep up with inflation.

But will that trend continue? We just don’t know. There are numerous factors that could cause inflation to increase or slow down.

President Trump has proposed tariffs on foreign goods, and while the goal there is to strengthen the U.S. economy, the fear is that this policy will lead to a surge in inflation and higher costs. Of course, an uptick in inflation would mean a larger 2026 Social Security COLA. But it wouldn’t necessarily put seniors — or Americans on a whole — in a better financial position.

It’s too soon to know

Because Social Security COLAs are calculated based on third quarter inflation data, it’s far too soon to lock in a number for 2026 with any amount of certainty. In December, the non-partisan Senior Citizens League estimated that 2026’s COLA would amount to 2.5% — the same as this year’s COLA. But a lot could change between now and when the program’s upcoming COLA is announced in October.

So where does that leave seniors? Barring an extreme period of inflation in the coming year, it’s best to assume that 2026’s Social Security COLA will be fairly modest. That could mean anything from a 2% lift to a 4% lift. But unless inflation takes a serious turn for the worse, it’s unlikely that the program’s upcoming COLA will mimic the 5.9% lift seniors got in 2022 or the 8.7% increase they got in 2023.

Let’s remember, too, that if inflation starts to tick upward at a pace that surprises economists, the Fed will likely react by pausing its interest rate cuts. The Fed probably also won’t hesitate to raise rates if it fears inflation is headed in the wrong direction. So it’s unlikely that 2026’s Social Security COLA will be a record-breaker either way. But technically, anything’s possible.