Money Research Collective’s editorial team solely created this content. Opinions are their own, but compensation and in-depth research determine where and how companies may appear. Many featured companies advertise with us. How we make money.
New Social Security COLA Estimate Ticks Down After Inflation Data
By Pete Grieve MONEY RESEARCH COLLECTIVE
But tariffs are on the horizon.
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.”
More from Money:
When Social Security Recipients Will Get Their Checks in April
Why Millions of Social Security Beneficiaries Will Receive Bigger Payments Starting in April
White House Plans to Eliminate Social Security Payments by Paper Check
Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.