Future Social Security COLA Forecast May Disappoint Seniors

Millions of American seniors depend on Social Security for their financial well-being. According to data reviewed by the Social Security Administration, half of households with an individual aged 65 or older rely on this government program for the majority of their income. This reliance makes the annual cost-of-living adjustment (COLA) critical for these households striving to cope with rising costs of goods and services.

As we look ahead to 2026, early indicators suggest that seniors may be facing modest increases in their Social Security benefits next year, which could lead to disappointment.

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Tariffs could change all of that. Here’s a closer look at the current situation and how these tariffs might influence your benefits next year.

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Understanding How Your Annual Social Security COLA is Calculated

The COLA is meant to ensure that Social Security benefits remain in line with the cost of living. Although the program started issuing monthly checks in 1940, it wasn’t until 1975 that Congress automated the process to calculate the COLA.

Currently, the COLA is derived from a specific measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics releases this single index each month, reflecting price changes across over 200 spending categories, adjusting based on price fluctuations.

To set the COLA before January’s benefit checks, the Social Security Administration looks at the average year-over-year growth in the CPI-W during the third quarter. If this figure is negative, seniors will not receive an adjustment. Critics argue, however, that the CPI-W fails to adequately capture the reality of expenses faced by seniors today.

In 1987, the Bureau of Labor Statistics introduced an alternative measure called the Consumer Price Index for the Elderly (CPI-E), which adjusts spending categories to better reflect the expenses of those aged 62 and older. Many advocate that the COLA should instead be based on CPI-E data.

Despite the differences between CPI-W and CPI-E, both gauges have shown similar cumulative trends over the last 15 years. For the time being, the Social Security Administration continues to rely on CPI-W, which might yield a disappointing COLA for 2026.

Latest Updates on the COLA Forecast

The Senior Citizens League, an advocacy group for seniors, updates its COLA forecast following each monthly CPI report released by the Bureau of Labor Statistics. The most recent report, issued on April 10, indicated that March CPI-W was 2.2% higher compared to the same month the previous year. This marked a slowdown from February, which registered a 2.7% increase, and January’s 3% increase.

Despite this deceleration, the Senior Citizens League has raised its estimate for the 2026 COLA to 2.3%. This figure falls short of the 2025 COLA, which was 2.5%, and represents a substantial decrease compared to the increases seen from 2021 to 2024. Many seniors might find this insufficient in meeting their financial needs.

March’s CPI data showed little effect from former President Trump’s tariff policies. Consequently, the Senior Citizens League did not factor potential COLA adjustments that could arise from higher import prices into their predictions.

Examining the Future Impact of Tariffs

Most of the significant tariffs planned against trade surplus countries have been put on hold. However, the U.S. government still imposes a 10% tariff on all imports, a 25% tariff on auto parts, and also 25% tariffs on goods from Mexico and Canada. Tariffs on Chinese imports remain at 145% as of now.

These tariffs have the potential to raise prices on many consumer goods, ranging from vehicles to groceries, clothing, and prescription medications. The U.S. economy relies heavily on international trade, making such tariffs impactful.

While some contend that tariffs could strengthen the dollar and mitigate price increases, most economists predict that they will instead drive up inflation. Notably, following the announcement of these tariffs, the U.S. Dollar index dropped to a three-year low.

Though the immediate effects of the tariffs can take time to materialize, it is anticipated that by summer, consumers will begin to experience the financial burden. This is coincidentally when CPI figures will start affecting next year’s COLA.

This delay means that while seniors might eventually see a higher COLA due to rising prices, they could face significant cost increases from tariffs in the interim. The lag between the CPI measure and the COLA implementation—up to six months—implies that seniors may struggle with elevated prices while awaiting an adjustment that covers their increased living costs.

For seniors, moderate inflation is preferable as it allows COLA adjustments to accurately reflect real expenses. Unfortunately, tariffs make this scenario increasingly unlikely.

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