Social Security cost-of-living adjustment for 2026 is projected to be lowest in recent years. Why that may change
Customers shop for produce at an H-E-B grocery store on Feb. 12, 2025 in Austin, Texas.
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The Social Security cost-of-living adjustment for 2026 is on pace to be the lowest annual benefit increase in five years, according to new estimates.
But that may change depending on the pace of inflation in the coming months.
The COLA may be 2.4% in 2026, according to new projections from both Mary Johnson, an independent Social Security and Medicare policy analyst, and The Senior Citizens League, a nonpartisan senior group.
If that increase goes into effect next year, it would be lower than the 2.5% boost to benefits Social Security beneficiaries saw in 2025. It would also be the lowest cost-of-living adjustment since 2021, when a 1.3% increase went into effect.
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The Social Security COLA provides an annual inflation adjustment to all of the program's beneficiaries, including retirees, disabled individuals and family members.
The annual adjustment for the next year is calculated by comparing third-quarter inflation data for the current year to the previous year. The year-over-year difference determines the annual increase. However, if there is no rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from year to year, the COLA may be zero.
The CPI-W, used to calculate Social Security's COLA, increased by 2.1% over the past 12 months, according to data released Tuesday by the Bureau of Labor Statistics.
In the months ahead, two factors may affect retirees' cost of living, experts say. Tariffs may push inflation higher
Inflation, as measured by the broader consumer price index, sank to its lowest 12-month rate at 2.3% in April since 2021.
Yet tariffs may push the inflation rate higher in the months ahead, if those taxes imposed on imported goods go into effect.
Tariffs would prompt higher consumer prices and inflation. If that happens in the months ahead, the Social Security cost-of-living adjustment estimate for 2026 may move higher.
'This year will be a closer year to watch because of the tariffs,' Johnson said of the 2026 COLA estimate, which is recalculated every month with new inflation data.
The official COLA for the following year is typically announced by the Social Security Administration in October. Prescription drug costs
President Donald Trump on Monday issued an executive order taking aim at high prescription drug costs in the U.S. The White House hopes to bring those prices in line with other countries.
The policy would apply to Medicare and Medicaid, in addition to the commercial market, according to the White House.
Changing drug prices would be unlikely to impact the COLA estimate, according to Johnson. But retirees would see an impact to their personal budgets if drug prices came down, she said.
Many details of the executive order still need to be fleshed out, noted Leigh Purvis, prescription drug policy principal at the AARP Public Policy Institute. Yet the nonprofit organization, which represents Americans ages 50 and up, praised the Trump administration's efforts to curb big drug companies' ability to charge retirees high prices for necessary prescriptions.
'A lot of people are aware that prescription drug prices are too high, and I think a lot of people are aware that we're paying a lot more than other countries,' Purvis said.
'So any efforts moving us in the direction of paying less and paying something that's more comparable to the rest of the world, I think is something that people could probably get behind,' she said.
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