For millions of Americans, Social Security checks are the primary, and sometimes sole, source of income enabling a cohort of vulnerable individuals to make ends meet each month. The amount each retiree receives is determined based on the years worked and income earned. Inflation, however, needs to be factored in as well and since this is something beyond the control of these retirees, particularly since they are past the working age, the government has to make provisions to ensure that the monthly benefit checks are able to withstand any effects of inflation.
As such, each year, a cost of living adjustment is calculated for Social Security.
Social Security’s Cost of Living Adjustment for 2026
In the October that just passed, the Social Security Administration (SSA) announced that retirees will be receiving a 2.5% cost of living adjustment (COLA) and with this announcement came much disappointment from a number of senior citizens. The mass disappointment was not all that surprising as 2.5% is a rather small figure and previously, cost of living adjustments from the SSA have been significantly more robust.
The reason behind this tiny increase can be traced back to the fact that since the beginning of 2025, inflation appears to have cooled a fair amount. Whilst lower inflation rates may sound ideal in theory, for these retired beneficiaries, it could mean a lower cost of living adjustment for 2026 than that of 2025.
This is just speculation, however, as it is still too early in the year to determine the COLA for 2026. The Social Security Administration uses inflation data from the third quarter when determining the COLAs for the upcoming year.
However, drawing from data currently available, the Senior Citizens League, a nonpartisan advocacy group, has already begun prediction what next year’s COLAs will look like. As such, the advocacy group began calling for a 2.3% boost to Social Security benefits in 2026 since early on in April.
Whilst 2.3% is not a particularly desirable figure, it appears that this might be the best case scenario for 2026’s COLAs if the matter of tariffs persists on.
Impact of tariffs on COLAs
It is no hidden fact that the Trump Administration has been implementing tariffs on a wide array of imports since taking to office. Until these figures stabilize, it remains uncertain as to what the price of goods will look like in the near future. Experts, however, seem certain that an increase in imminent.
If this does indeed ring true, the cooled down inflation rates will almost certainly be reversed during the second half of 2025. Subsequently, if the third quarter sees a huge uptick, beneficiaries could be looking at a much larger COLA for 2026.
Again, this increase only sounds desirable in theory. A larger COLA increase means that prices have also increased. It is a catch-22 for beneficiaries regardless and the best case scenario for these retirees is a breakeven wherein the COLAs allows for sustainable buying power from year to year.
At its core, there is no doubt that a larger COLA will be of great help in making ends meet for retirees each month. However, the tariff-related price hikes are likely to burden the budgets of these Social Security recipients regardless of how high the COLAs are.
The Senior Citizens League has also warned that tariffs might result in price hikes for medication, a cost that many retirees are already struggling with. Not to mention the potential increase that food prices will be faced with. The bottom line is that seniors on Social Security need to brace themselves for possible price hikes across the board.
If possible, this cohort should also consider finding alternate options to boost their monthly income such as, working part time or joining the gig economy. That being said, it is still too early to appropriately predict the COLA or the impact of tariffs for 2026 but retirees should not celebrate too soon even if the outcome is higher than expected.