Social Security beneficiaries are likely to receive a larger cost of living adjustment (COLA) next year after the latest inflation data show price pressures persisting, according to a new report.
Social Security's COLA is calculated using a variant of CPI data that measures average annual inflation for the months of July, August and September – meaning the final COLA for 2026 will be unveiled after September's CPI print is released in mid-October.
The Bureau of Labor Statistics on Thursday released the consumer price index (CPI) for August, which showed headline inflation rising from 2.8% in July to 2.9% last month on a year-over-year basis. Headline CPI rose 0.4% for the month of August.
With the latest data in hand, The Senior Citizens League (TSCL) estimated that the Social Security COLA will be 2.7% when it's announced next month – which would raise the average monthly benefit for retired workers by $54 from $2,008 to $2,062.
Social Security's COLA is based on inflation data from July, August and September. (Kevin Dietsch/Getty Images / Getty Images)
TSCL noted that its latest estimate is higher than what was projected at the outset of this year, when it estimated there would be a 2.1% COLA, because "inflation is substantially higher" than its model anticipated.
It also noted that a COLA of 2.7% would be roughly average from a historical standpoint, as the annual benefit adjustments have averaged 2.6% over the last 20 years. The highest COLA was 8.7% in 2023, while the lowest were in 2010 and 2011 when the COLA was 0.0%.
Social Security's official COLA for 2026 will be announced after September CPI data is released next month. (Jeffrey Greenberg/Education Images/Universal Images Group via Getty Images / Getty Images)
TSCL Executive Director Shannon Benton noted that the group's research shows that "many seniors believe inflation is much higher than the COLA estimates," and that about 80% of seniors thought inflation last year was substantially higher than the 2.5% COLA implemented at the start of this year.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) developed its own forecast for Social Security's 2026 COLA, which estimates the annual inflation adjustment will be slightly higher at 2.8%.
"For many people, Social Security is the only inflation-protected income they have in retirement," said Bill Sweeney, AARP's senior vice president of government affairs. "The COLA allows America's seniors to keep us as everyday costs continue to rise – from groceries to housing to prescription drugs."