The official announcement of the cost-of-living adjustment (COLA) is still two months away, but recent inflation data from July has led experts to converge on similar predictions.
More retirees are now reliant on social security for their income. In a recent Gallup poll, 62% of retirees indicated that Social Security serves as their main income source, a slight rise from 60% last year. Additionally, 24% mentioned that their monthly benefits play a secondary role in their retirement finances.
For those utilizing Social Security in their budgeting, any shifts in their living expenses or spending plans likely have a minimal effect. The COLA is designed to adjust Social Security benefits to align with rising costs, yet many seniors have struggled recently with inflation affecting a broad range of expenses.
While there are still two months until the official COLA for 2026 is released, retirees have access to initial data that may guide their expectations for next year.
Understanding how the government calculates COLA
Before getting into the newest data, it’s helpful to clarify how the Social Security Administration (SSA) determines COLA each year.
Most are aware that COLA is linked to inflation, but it relies on specific measures for accuracy. The calculation uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Compiled monthly by the Bureau of Labor Statistics from a nationwide price survey, it includes over 200 categories, each weighted in the overall calculation.
To calculate the COLA, the SSA strictly considers the CPI-W readings from the third quarter (July to September). The average increase during this period compared to the previous year sets the COLA for the following year.
On August 12, the Bureau of Labor Statistics released the July CPI figure—this acts as the first data point needed for next year’s COLA. CPI figures for August and September will follow on September 11 and October 15, respectively, completing the data set necessary for determining the 2026 COLA.
Where the 2026 COLA stands currently
The July CPI report came in below expectations, with the overall CPI-U increasing by 2.7% compared to the previous year. However, the core CPI, excluding more volatile food and energy prices, rose by 3.1% annually, which is higher than anticipated. This suggests a growing challenge for seniors trying to keep pace with rising costs next year.
The CPI-W has climbed by 2.5% over the last year, now at 316.349, which is a 0.1% increase from the previous month.
Based on recent inflation trends and projected CPI-W numbers for the next two months, the estimate for the 2026 COLA hovers around 2.6%. Alternatively, considering the average increase over the past three months, it’s closer to 2.7%. Both figures represent an increase over the 2.5% COLA from 2025.
There’s a valid reason to anticipate rising inflation in the next couple of months, notably due to tariffs announced earlier this year. Many companies had previously stockpiled to keep prices stable, but with import taxes set to rise, price adjustments are likely to occur.
The Senior Citizens League predicts a COLA of 2.7% for next year, up slightly from the earlier estimate of 2.6%. Independent analyst Mary Johnson also forecasts a 2.7% COLA based on current CPI-W data. The Social Security Committee’s report from June had already projected a similar estimate of 2.7%.
As these estimations align, they appear to reflect the best understanding of forthcoming adjustments. Unless there are significant disruptions in pricing during the next few weeks, retirees should prepare for a COLA around 2.7% in 2026.
