Millions of Social Security recipients could see a 2.7% to 2.8% increase in their monthly checks in 2026, according to new estimates based on the most recent government inflation data.
A 2.8% Social Security cost-of-living adjustment may be implemented next year, according to Mary Johnson, an independent Social Security and Medicare policy analyst. According to her, this increase would raise the average monthly retirement benefit by about $54.70.
Separately, the Senior Citizens League estimates a 2.7% COLA in 2026, raising the average monthly retirement benefit by $54.
According to Social Security Administration data from August, retired workers and their families, including spouses and children, receive an average monthly retirement benefit of $1,955.
These projected increases would be higher than the 2.5% increase in benefits that went into effect in 2025. The Senior Citizens League reports that the COLA has averaged 2.6% over the past 20 years.
The COLA projections are based on new consumer price index data for August, which was released Thursday.
The official Social Security cost-of-living adjustment will include one more month’s inflation data.
The Social Security Administration typically announces the next year’s COLA in October. It is calculated using third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
According to Johnson, the Social Security COLA will most likely be 2.8% once September data is included. To keep the COLA at 2.7%, there would have to be “virtually no inflation growth at all in September,” she stated.
Retirees worry tariffs will hurt their buying power
While new estimates point to a higher COLA than this year’s 2.5% boost to benefits, the projections are lower than some increases Social Security beneficiaries have seen in recent years. That includes a 3.2% cost-of-living adjustment for 2024, as well as record-high increases Social Security beneficiaries saw in 2022 and 2023, when the annual COLAs were 5.9% and 8.7%, respectively.
These record increases occurred as inflation surged following the start of the Covid pandemic.
Retirees are concerned that a similar shock could cause inflation to rise again.
According to a Nationwide Retirement Institute poll conducted in August, half of retirees are “terrified” about the potential impact of tariffs on their retirement income or savings.
According to Nationwide, roughly two-thirds of individuals receiving Social Security benefits believe that tariffs will cause inflation to exceed what annual cost-of-living adjustments can cover.
More than half of current Social Security beneficiaries surveyed said they have already had to cut back on discretionary spending because their expenses have outpaced the growth of their benefits.
If a retiree’s monthly Social Security checks increase by $54 due to a cost-of-living increase, but other essential expenses such as rent rise, the inflation adjustment is insufficient, according to Tina Ambrozy, head of strategic customer solutions at Nationwide.
Medicare costs are also expected to rise next year. According to Medicare trustee estimates, the standard monthly Part B premium may increase by $21.50 to $206.50 per month from $185. That would be “very close” to the program’s highest premium increase in history, which was $21.60 per month in 2022, according to Johnson.
Johnson predicted that Medicare Part D premiums for prescription drug plans could rise by up to $50 per month by 2026.
How higher inflation affects retirees
While the pace of inflation has come down from the 2021 and 2022 pandemic highs, seniors are still seeing higher prices on grocery store shelves and elsewhere.
Retirees are “particularly sensitive to inflation,” according to Jean-Pierre Aubry, associate director of retirement plans and finance at Boston College’s Center for Retirement Research — though how it affects them varies by individual circumstances.
For those who rely on fixed income investments such as bonds, inflation can be “quite painful” if returns and coupon payments do not keep up with rising living costs, according to Aubry.
However, for seniors who still have mortgage debt, inflation can help by lowering the real value of those outstanding balances, he said.
Notably, because Social Security cost-of-living adjustments are implemented once a year, the increases may occur after inflation has risen.
Aubry believes that if retirees can smooth out their spending by avoiding sharp ups and downs, the lag will be less of an issue.
While 74% of respondents to Nationwide’s survey believe they can manage their own Social Security benefits, only one-third are confident in their understanding of the program.
Working with a financial advisor can help retirees fill knowledge gaps and better manage their benefits and assets, according to Ambrozy.
