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

With a key inflation number of 2.5%, analysts predict a modest bump in benefits

Deirdre Shesgreen,

AARP

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En español

Published August 12, 2025

Jon Krause

Social Security recipients now have an initial indication of how much their cost-of-living adjustment (COLA) might be in 2026.

A key gauge for inflation — the Consumer Price Index for Urban Wage Earners and Clerical Workers (known as the CPI-W) — rose by 2.5 percent in July, compared with one year ago, according to Aug. 12 data from the federal Bureau of Labor Statistics (BLS).

Annual COLAs are based on how much the CPI-W changes in the third quarter of the year — July, August and September — from the same period the previous year. The final COLA for 2026 will be announced in October.

A CPI-W of 2.5 percent for July suggests that Social Security recipients may see a modest bump in their Social Security payments starting in January 2026.

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“We’re likely to see a relatively historically normal COLA, maybe in the range of 2.6 to 2.7” percent, says Indivar Dutta-Gupta, a distinguished visiting fellow with the National Academy of Social Insurance.

Mike Lynch, a managing director of applied insights at Hartford Funds, put his estimate a bit lower, saying it would be in the “low to mid” 2 percent and “probably in line with” the 2025 COLA, which was 2.5 percent.

The final two inflation data points that go into the COLA calculation will be released in the coming months. Teresa Ghilarducci, a labor economist at New York City’s New School for Social Research, predicts inflation will tick up again because of the tariffs. Ghilarducci worries that a moderate COLA “probably won’t be enough to cover the inflation rates that we’re headed into.”

A 2.5 percent COLA would increase the average benefit for a retired worker — which as of July 2025 was $2,006 a month — by about $50. The average monthly survivor benefit ($1,574 as of July) would inch up by about $39, while the average Social Security Disability Insurance payment ($1,445 in July) would go up by $36.

The 2025 COLA, which was based on third-quarter inflation data for 2024, boosted benefits by about $49 a month for the average Social Security retiree’s payment. The 2024 COLA 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.

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 2.7 percent year over year in July.)

How Is the COLA calculated?

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,” Lynch says. “We all know the price of eggs and milk and gas.”

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.”

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Deirdre Shesgreen is an AARP writer and editor covering Social Security. She previously worked as a state news editor for the AARP Bulletin and as a reporter and editor at USA Today, the St. Louis Post-Dispatch and other publications.