Social Security COLA 2026: How Much Will Payments Increase Next Year?

Teresa Ghilarducci, a labor economist at New York City’s New School for Social Research, expects a COLA of about 2.8 percent but says that “probably won’t be enough to cover the inflation rates that we’re headed into” if the tariffs remain in place. The Supreme Court has agreed to hear a case challenging the legality of those import taxes.

The 2025 COLA, which was based on third-quarter inflation data for 2024, boosted the average Social Security retirement benefit by about $49 a month. The 2024 COLA of 3.2 percent pushed payments up by $59 for the average retiree.

Helping older adults keep up

Bill Sweeney, AARP’s senior vice president of government affairs, says the annual COLA is one of the most important elements of the Social Security program.

“This wasn’t originally part of Social Security,” he says, noting that in 1972 AARP fought to make COLAs automatic rather than subject to a congressional vote.

“For many people, Social Security is the only inflation-protected income they have in retirement,” Sweeney says. And for more than 50 years, he adds, the COLA “has allowed America’s seniors to keep up as everyday costs continue to rise — from groceries to housing to prescription drugs.”

Some older adults may also benefit from a new $6,000 tax deduction for older taxpayers included in the recent “One Big Beautiful Bill.” The measure applies to taxpayers 65 and older with incomes below a certain threshold, starting with their next tax filing and running through the 2028 tax year. After that, it is set to expire. AARP supported the tax provision’s inclusion in the legislation.

How is the COLA calculated?

The CPI-W is a measure of changes in prices for a selection of goods and services, including food, energy and medical care, that is reported monthly by the BLS. It is a subset of the Consumer Price Index for All Urban Consumers (CPI-U), which tracks a broader range of retail prices and is considered the “headline” number in measuring inflation. (That main index increased 2.9 percent year over year in August.)

To calculate the COLA, the Social Security Administration compares the average CPI-W for the third quarter of each year to the figure for that same period the year before.

From 2001 through 2020, the COLA averaged about 2.2 percent. If there is no inflation, there’s no COLA — that happened in 2009, 2010 and 2015. The biggest adjustment ever was 14.3 percent in 1980.

In 2024, the CPI-W rose 2.9 percent in July, compared with the prior year, then 2.4 percent in August and 2.2 percent in September. Over the full quarter, the index was 2.5 percent higher, on average, than for the same period in 2023.

Social Security benefits can lag inflation during periods of price volatility, leaving some beneficiaries struggling to make ends meet. For example, beneficiaries temporarily lost buying power in 2021, when the 1.3 percent COLA — based on low inflation in 2020 — was outpaced by surging consumer prices during the COVID-19 pandemic.

That pattern repeated in 2022, when benefits increased by 5.9 percent but inflation reached a 9 percent peak. The following year’s COLA of 8.7 percent helped beneficiaries catch up.

While inflation had started to cool this spring, many may still feel that the COLA “hasn’t kept up as much as it should,” says Mike Lynch, managing director of applied insights at Hartford Funds. “We all know the price of eggs and milk and gas.”

An August 2025 survey by the Nationwide Retirement Institute found that 52 percent of Social Security recipients had cut back on discretionary spending, such as travel and dining out, due to the rising cost of living. Thirty-one percent said they had cut back on essentials, such as groceries and medications.

Dutta-Gupta notes that the COLA is based on costs for goods and services used by the “typical urban worker,” not for older adults who may face high medical costs and other extra expenses.

“Sometimes the COLA will understate rising costs faced by people with disabilities and the elderly who depend on Social Security benefits,” he says.

Lynch, who regularly gives seminars on Social Security, says that while the COLA is important, it’s also key for current and future retirees to think carefully about the broader retirement landscape.

“It’s not our parents’ or grandparents’ retirement anymore,” he says. In part because of increased longevity for some Americans, “it’s probably going to be a lot longer, a lot more active, which means they’re going to need more money.”