Every year, millions of Americans’ life depends on the Cost of Living Adjustments (COLA) to keep up with the rising daily expenses. It is designed in such a way that the consumption power of individuals remains stable in times of inflation and higher cost of living. For the beneficiaries of Social Security, especially the retired senior citizens of society, it is an immediate helpline.
However, it seems the increase in COLA rates will be the lowest compared to the previous five years. It is still not confirmed, and the changes will depend on the speed of inflation in the upcoming months.
New COLA Estimate for 2026
The Social Security COLA is an initiative, or we can say a government financial aid, that provides a yearly inflation adjustment to all the eligible beneficiaries, like retirees, individuals with disability, and survivor family members. It is calculated on the basis of the inflation trends of the current year and the previous year. So the calculation of COLA for 2026 will be declared on the basis of the inflation trend of 2024’s third quarter and 2025’s third quarter. Basically, the CPI-W is the basis of the calculation
A few months back, it was predicted by Mary Johnson and the Senior Citizens League that the COLA may be 2.4% in 2026. And now there has been a recent update on the calculation that it can be 2.5%. If this goes into effect in 2026, it will be the same as it is in 2025. And also, it would be the lowest COLA increase since 2022.
Social Security COLA Increase in 2026 – Overview
| Article on | Social Security COLA Increase in 2026 |
| Country | U.S.A |
| Department | Social Security Administration |
| Beneficiary | Senior Citizens, Disabled, Retirees, Widows |
| COLA increase in 2026 | 2.5% (predicted) |
| Category | Government Aid |
| Official website | ssa.gov |
COLA (Cost of Living Adjustment)
In the 1970s, inflation was so high that compensation-related contracts, real estate contracts, and government benefits had to use COLA to shield against the growing inflation. The BLS (US Bureau of Labor Statistics) confirms the CPI-W that SSA uses to calculate COLAs.
The calculation is based on the increase in percentage in the CPI-W from the 3rd quarter of a year to the same quarter of the next year. The first COLA rate was based on the years 1974 and 1975. You can check the updated information on the official SSA website.
CPI-W: What it is and how it is included in COLA Calculation
The calculation of the COLA rates is on the basis of the average annual increase in the CPI for wage earners and clerical workers (CPI-W) in the 3rd quarter of every year. CPI-W is a measure that indicates the difference in consumer prices of goods and services. It is regulated by the U.S.
Bureau of Labor Statistics. CPI-W is commonly used to measure inflation by both private and government organizations. 295 of the country’s population is measured by this measure. It is varied as the consumer spending varies according to their age group. While the elderly (those above 60) usually spend most of their income on healthcare, the younger generation seems less concerned about healthcare facilities.
A study says that when older adults spend more than 15% of their income on healthcare, the younger workers only spend around 7%. This differentiation often deflects the rate of CPI-W. And it often results in COLA seeming inadequate to keep up with the rising costs of goods and services.
COLA’s Effect on Salary Structure
Due to inflation and an increase in COLA rates, the salary structure of employees gets restructured to compensate for the cost of living. It is not similar to raise, as raise depends on the overall performance of the employee, and COLA is intended to account for the effect of inflation on goods and services. Many employers adjust salaries according to either inflation compensation or the relocation of an employee.
Cost of living adjustments due to relocation
Many times, an employee gets transferred to a different city for the same job, either because of expansion or substitution. It comes with the increase in salary to bear the cost of living in a new location.
If you are someone who is looking to move to a city for a new job, you can check the cost of living indexes to compare the salary offered and see which of the offers is best suited for your living standards. Take note that each state and city may incur different cost-of-living expectations.
Temporary COLA
Temporary COLA refers to when employers provide temporary COLA adjustments for short-term relocations and assignments needed to perform in a different state or city. It is mostly seen in military services.
For such cases, these adjustments are more like a per diem allowance (expense for a specific requirement), like paying higher rent. These extra payments pause when the assignments end, but a permanent COLA provides a permanent increase in salary.
Consequences of Lower COLA Rates
The rate of COLA increase directly impacts the individuals who are not working and come under the Social Security Benefit program. Majorly, the retirees get affected by this. As seen from the past decade, inflation is increasing every year drastically, and increasing the overall cost of living.
- It impacts the purchasing capability of commoners.
- Increase expenses on medical costs and facilities.
- People will rely on savings and may drain them too.
- Can’t afford the rise in housing and even utility expenses.
Effect of Trump’s tariffs on COLA
President Donald Trump has imposed many tariffs in recent months upon his re-election and some may have an adverse effect on the rising inflation. Yet many of the tariffs have been paused for now, many economists still believe that even one will be more than enough to escalate inflation.
Although there is some short-term relief because of the de-escalation of tariffs with China, according to economist Mike Reid, it still seems that there would be an increase in the rate of escalation by 3% later this year. It was decided by both China and the US that they would temporarily pause their tariffs for 90 days. If the induced tariffs cause a high inflation trend, then there is a slight chance that the COLA rate might increase from what has been predicted.
Latest Updates on COLA increase in 2026
The official announcement for an increase in COLA rates in 2026 has not yet been announced by the Social Security Administration. It is expected to be announced by October 2025, which will be based on the inflation data in the 3rd quarter. Due to Trump’s drug prescription policy’s legal negotiations and challenges, the COLA prediction can be slightly different.
If you are planning to retire next year, this rate will be very important for you. Until the final rates are announced, make sure not to spend on unnecessary expenses and save as much as possible. As it is rumored that the increase of COLA next year is predicted lowest in the last 5 years.
| Official Website | Click Here |
| Homepage | BlackSea-Commission.org |
