According to a new report, Social Security beneficiaries may see an increased cost of living adjustment (COLA) next year due to recent inflation data indicating rising price pressures.
The COLA is calculated based on various Consumer Price Index (CPI) metrics that monitor average annual inflation during July, August, and September. The final adjustment for 2026 will be announced following the release of the September CPI in mid-October.
On Thursday, the Bureau of Labor Statistics reported that headline inflation rates rose from 2.8% in July to 2.9% year-over-year in August, with the CPI increasing by 0.4% for that month.
With this latest data available, the Senior Citizens League (TSCL) has projected the Social Security COLA to be around 2.7% when it’s reported next month.
Interestingly, at the end of September, there has been a notable shift concerning Social Security beneficiaries.
TSCL highlighted that these updated estimates are above earlier predictions made this year, which forecasted a 2.1% COLA due to significantly higher inflation rates than expected.
The anticipated 2.7% COLA aligns with historical averages. Over the past two decades, it has averaged about 2.6%. The highest adjustment recorded was 8.7% in 2023, while the lowest, at 0.0%, occurred in 2010 and 2011.
Despite reduced measurement speeds from FRED, inflation remained consistently high in August.
Shannon Benton, executive director of TSCL, remarked that a survey indicated many older adults believe inflation is considerably higher than the current COLA estimates, with about 80% from the previous year feeling it is much more than the 2.5% increase seen earlier this year.
The Committee for a Responsible Federal Budget (CRFB) has also made its forecast for the 2026 COLA, estimating it slightly higher at 2.8%.
Bill Sweeney, senior vice president of government affairs at AARP, emphasized that for many, Social Security represents the only income during retirement that is protected against inflation. The COLA helps seniors manage the rising costs of necessities like groceries, housing, and prescription drugs.
