Social Security beneficiaries will receive a cost-of-living adjustment (COLA) in 2026, but even the most hopeful projections will have many retirees pinched. The Social Security Administration announces the official 2026 COLA on October 15, 2025, following the release of September inflation figures by the Bureau of Labor Statistics. The Social Security Board of Trustees’s current projections are that benefits will increase between 2.4% and 3%, with a midpoint estimate of 2.7%.
For the average retired worker with a monthly stipend of $2,008, this represents additional monthly income of $48 to $60, with the midpoint estimate adding up to an extra $54 monthly or $648 annually. While any increase is welcome, the case for most recipients will prove to be more complex due to increasing healthcare costs and inflationary pressures.
Best-case scenario: 3% increase
The highest favorable projection places 3% COLA in 2026, which would provide the largest benefit increase in this forecast range. Based on this:
- Retirees would receive an additional $60 a month ($720 annually)
- Spousal beneficiaries with a median monthly payment of $955 would receive an additional $29 a month ($348 annually)
- Survivors with median benefits of $1,575 would receive an additional $47 a month ($564 annually)
- Disabled workers making a monthly average of $1,583 would see an additional $47 per month ($564 per year)
This worst-case is a significant increase over the 2.5% COLA enacted in 2025, one of the lowest raises in recent memory. However, even this worst-case estimate does not keep up with the 2.9% inflation rate between August 2024 and August 2025, suggesting that beneficiaries could still lose purchasing power.
Worst-case scenario: 2.4% increase
The conservative projection estimates a 2.4% COLA increase, which would give the minimum benefit raise within the projected range. This would provide:
- Retired workers with $48 extra per month ($576 per year)
- Spousal beneficiaries with $23 extra per month ($276 per year)
- Survivors with $38 extra per month ($456 per year)
- Disabled workers with $38 extra per month ($456 per year)
This worst-case scenario would represent a marginal increase from 2025’s adjustment and would most likely not be sufficient to offset rising cost of living, particularly given the huge Medicare premium increases projected for 2026.
The Medicare Premium challenge
The most important factor dampening the impact of any COLA increase is the projected 11.6% increase in Medicare Part B premiums for 2026. The base monthly premium will rise from $185 to $206.50—a $21.50 monthly increase. This is the largest dollar hike since 2022 and more than double the $10.30 increase that happened in 2025.
For recipients of the $54 a month middle-estimate COLA, the increase in Medicare premiums would consume nearly 40% of their benefit increase, leaving them with around $32.50 of additional net income. This has the same effect as reducing the actual COLA from 2.7% to nearly 1.6% for most recipients.
The rise in the Medicare premium is because of several reasons including medical inflation, the expansion of prescription drug coverage through the Inflation Reduction Act, and demographic pressure of aging populations requiring more services.
Hold harmless protection: Limited relief
The Medicare “hold harmless” provision provides some safeguard for beneficiaries by guaranteeing that Social Security benefits won’t decrease due to Medicare premium increases. The rule caps the increase in premiums to no higher than the COLA amount for eligible recipients.
But this protection has significant limitations. The provision does not cover approximately 30% of Medicare beneficiaries, such as those who are new to Medicare, individuals not receiving Social Security benefits, and higher-income beneficiaries who face Income-Related Monthly Adjustment Amounts (IRMAA) charges. In 2025, taxpayers with modified adjusted gross income of $106,000 or more will face additional premium surcharges.
The “Trump Bump” and inflation concerns
Economic commentators have labeled the anticipated 2026 COLA hike a “Trump Bump,” citing increased inflation expectations as the result of imposing widespread tariffs. President Trump’s policy on trade has pushed United States’ average tariffs to their highest since 1941, fuelling inflation pressures that started building up in April 2025.
The Senior Citizens League has consistently raised its 2026 COLA estimate for five consecutive months, raising estimates from 2.2% in March to 2.7% in August. While tariffs may generate a greater COLA, they pose a double threat to retirees. TSCL Executive Director Shannon Benton warned that “imposing widespread tariffs on products from several countries could significantly affect the daily lives of seniors.”
BNP Paribas economists estimate that US companies have already absorbed around 64% of the cost of tariffs, foreign exporters 20%, and consumers 17%. They, however, foresee companies only passing on 63% of cost increases over the coming months, which could raise inflation once the COLA calculation period elapses in September.
Calculation methodology and timing concerns
The 2026 COLA will be calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of 2025 (July to September), versus the same three months from the last year when a COLA was issued. This approach provides timing hazards for recipients since inflation after September won’t be included in the 2026 adjustment but will affect their purchasing power for the remainder of the year.
The CPI-W covers approximately 32% of the population of the United States and focuses on the clerical and hourly wage workers. Critics feel that the index fails to reflect the consumption of the retirees, who tend to allocate higher proportions of their budgets to healthcare and housing—components not entirely reflected in the calculation of CPI-W.
Government shutdown impact
The ongoing federal government shutdown began on October 1, 2025, and could delay the announcement of COLA. The Bureau of Labor Statistics briefly furloughed nearly all its 2,055 employees, which will potentially delay release of September inflation data needed to finalize the COLA calculation. Payments to Social Security beneficiaries will not be disrupted, as payments come out of trust funds committed to these payments rather than being appropriated to Congress annually as detailed here, How could a government shutdown on September 30 affect Social Security? This would happen with SSI and SSDI check payments.
Long-term purchasing power erosion
Even with annual COLA boosts, Social Security benefits have slowly been declining in purchasing power over the years. Average Social Security payments have lost approximately 20% of their purchasing power since 2010, based on the Senior Citizens League. This is due to COLAs being calculated in the autumn of last year but needing to cover inflation in the following year, causing there to be a persistent gap between benefit boosts and price increases.
A 2025 Employee Benefit Research Institute survey found that over half of the retired expected to have significant spending reductions next year due to inflation fear. Similarly, over half of retirees surveyed by The Motley Fool stated that Social Security benefits have failed to rise in tandem with increasing costs for the past two years due to ineffective COLAs.
