Social Security beneficiaries could see a 2.5% cost-of-living adjustment (COLA) in 2026, based on the latest inflation trends analyzed by independent policy analyst Mary Johnson. This newly updated projection, released this week, marks a slight rise from last month’s estimate of 2.4%.
If the 2.5% COLA becomes official, it would match this year’s increase and translate to an average monthly boost of around $40.70 for recipients. This is based on May’s average monthly benefit of $1,948.17. Currently, over 75 million Americans are receiving Social Security payments.
Why Inflation—and Tariffs—Matter
While May’s inflation numbers were fairly stable, economists caution that the full impact of former President Donald Trump’s proposed tariff hikes hasn’t yet shown up in consumer prices. If these tariffs start driving prices higher later in the year, the 2026 COLA could increase beyond the current estimate.
“There’s still time for this estimate to change, since we have four more months of inflation data before the COLA is finalized in October,” said Johnson. Financial experts are echoing that sentiment. “We haven’t seen a significant effect from tariffs yet, but they could pose a greater inflationary risk over time,” noted Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
Ken Kim, a senior economist at KPMG, predicts inflation might exceed 4% annually by the fall, which could impact the final COLA amount.
What Is COLA and How Is It Calculated?
The cost-of-living adjustment, or COLA, is a yearly benefit increase for Social Security and Supplemental Security Income (SSI) recipients to help benefits keep pace with inflation.
It’s determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), focusing on inflation data from July to September. If prices rise during this quarter, benefits go up accordingly.
As of May, the CPI-W showed a 2.2% year-over-year increase. This was slightly lower than the 2.4% rise seen in the broader Consumer Price Index (CPI), which also tracks inflation but uses a different demographic sample.
When Will the 2026 COLA Be Announced?
The Social Security Administration will officially reveal the 2026 COLA in October 2025, once the inflation data from the third quarter is finalized. Beneficiaries will begin receiving the updated payments starting in January 2026.
Although a 2.5% COLA may seem small, it reflects persistent inflation pressures and the potential for higher prices stemming from upcoming tariffs. With four more months of key inflation data yet to be released, millions of Americans are keeping a close eye on what the final adjustment will be.
William is a passionate finance blog writer with a knack for simplifying complex financial topics. With years of experience in personal finance, investing, and budgeting, he helps readers make smarter money decisions through practical advice and clear, engaging content. When he's not writing, William enjoys tracking market trends and exploring new ways to build financial freedom.