As prices seem poised to edge upward, so too does the possibility of a bigger cost of living adjustment for Social Security benefits in 2026.
As of mid-August, some estimate that Social Security benefits could see a 2.7% hike for the cost-of-living adjustment next year. It’s far from a final number as we’ve got two more months of inflation data to go into the final calculation — August and September.
In 2025, Social Security beneficiaries received a 2.5% boost, down from the 3.2% COLA hike in 2024.
While many Social Security beneficiaries would welcome seeing extra $50 or more a month heading into their checking accounts, they know the extra cash won’t cover much as they’re juggling big bills for health care, utilities and more.
Many remain concerned about how much extra tariffs ultimately will drive up prices on many items even more, as well.
According to one survey, about half of those age 61 and older are fearful of what changes in tariffs will do to their retirement savings or retirement income.
And about two-thirds of retirees believe that President Donald Trump’s higher tariffs will drive inflation at least somewhat beyond what upcoming cost-of-living adjustments for Social Security can cover, according to the 12th edition of the Nationwide Retirement Institute’s Social Security Survey.
The research was conducted in a 22-minute online survey in the United States by The Harris Poll on behalf of Nationwide among 1,812 adults age 18 and older who currently receive or expect to receive Social Security. The group of those surveyed included 502 baby boomers who are age 61 and older. The survey was conducted from June 2 to July 10.
We won’t know how much of a COLA jolt retirees and others might see next year until the official number is released in October.
The Social Security Administration press office typically releases the much-anticipated COLA number soon after the U.S. Bureau of Labor Statistics releases inflation data for September.
This year, the September inflation data is scheduled to be released on Oct. 15. The planned release for August inflation data is Sept. 11.
Social Security benefits would increase beginning with December benefits, which are payable January 2026. Federal Supplement Security Income payments would increase for January but those payments would be made at the end of December.
The annual cost-of-living adjustment for Social Security benefits is based on how inflation is running in the third quarter. The formula reflects monthly changes for July, August and September for the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The data for the three months for the CPI-W in 2025 will be averaged and then will be compared with the average of the third quarter last year. The percentage increase, if any, is what the Social Security Administration uses to determine any COLA hike. The Social Security Administration explains the complex formula online.
The highest COLA increase during the most recent bout of inflation was an 8.7% jump in 2023. That was the highest inflation adjustment since 1981 when the COLA boost was 11.2%. In 1980, a COLA record for Social Security benefits was set at 14.3%.
Mary Johnson, an independent Social Security and Medicare policy analyst, said the latest inflation trend gives her reason to consider the possibility that the COLA number could move up even higher to a 2.8% or above, if inflation heats up in August and September.
This summer, inflation has been relatively calm when it comes to many consumer prices. New car prices, for example, were only up 0.4% year-over-year in July, based on Labor Department data. Prices for used cars and trucks were up 4.8%.
Manufacturers and producers are being hit by significantly higher costs when they import parts and other goods, thanks to Trump’s tariffs. But automakers and others have been absorbing many of higher costs so far, cutting into profits.
Sticker shock, though, is expected to hit when consumers shop for 2026 model year cars and trucks as more of those vehicles arrive at dealer lots, according to Cox Automotive. New car and truck prices are trending higher, as lower-priced inventories of earlier models leave dealership lots.
The well-followed Consumer Price Index for All Urban Consumers rose 2.7% on a year-to-year basis in July before any seasonal adjustment. The figure was the same in June.
But we have seen an uptick in inflation from a few months earlier. The consumer price index rose 2.3% in April year-to-year, which was the lowest level since February 2021. The CPI rose 2.4% in May.
The CPI rose 0.2% month-over-month on a seasonally adjusted basis in July, after rising 0.3% in June, based on the Aug. 12 report by the U.S. Bureau of Labor Statistics.
Many analysts, though, are keeping a close eye on the producer price index, or which tends to forecast higher prices before they hit consumers at the checkout. The producer price index rose 0.9% in July month-to-month, much more than expected and the biggest spike in three years.
Analysts say the producer price index and the consumer price index appeared to show conflicting signals in July about inflation. One surged; the other held fairly steady.
As tariffs trigger higher costs, though, it’s logical to expect that more price hikes will soon be passed along to consumers.
Inflation often triggers more financial hardship for older adults over time. After all, many are living on fixed incomes. And many depend mainly on their Social Security benefits.
But, according to experts, it’s not always true throughout history that seniors suffer the most when it comes to price spikes.
Research indicates that younger consumers, for example, experienced significantly higher inflation than older adults during 2021 during the most recent spike in inflation, according to Jeff Horwich, senior economics writer for the Federal Reserve Bank of Minneapolis. .
“Today all age groups are pretty close, with Americans 54 and older experiencing slightly elevated inflation versus other groups,” Horwich said.
How well people are able to cope with higher prices depends a great deal on their source of income. Did they work at big companies that gave raises that kept up with inflation? Or did their wages stagnate?
How much inflation erodes your own current standard of living will vary far more among individuals than the CPI figure indicates.
“The other side of every household balance sheet is the income coming in: How much capacity do they have to adjust and absorb increasing prices?” Horwich said.
And, he noted, the hardship from inflation can vary significantly from “one seemingly-similar” household to another. Two neighbors are likely experiencing much wider differences in inflation than the differences when looking at categories like age or race.
Someone who owns a home, for example, with fixed 30-year-mortgage — or even has paid off their home — doesn’t face the same financial stress points as someone who rents and sees their monthly rent rise rapidly each year.
According to research by the Federal Reserve Bank of New York, several groups have experienced higher inflation than the national average, including households headed by those aged 55 and older, low-income consumers, as well as many college-educated workers, urban households and people living in the northeastern part of the country.
Over years of doing surveys, Johnson said, seniors often say they experience inflation at higher rates than the official data would suggest.
More of their budgets are spent on health care than what’s spent by younger working adults, for example. Hospital services were up 5.8% year-over-year in July, based on data from the Bureau of Labor Statistics. Medical services overall were up 4.3%.
The Bureau of Labor Statistics calculates that people 65 and older devote 13.4% of spending to medical care, while the general population devotes 8%.
“If health care is increasing faster than overall inflation as it is doing right now, the buying power of older and disabled consumers gets squeezed,” Johnson said.
“Those with savings may need to dip more deeply into their nest egg than anticipated, those without enough savings may go into debt, and those without savings may need to turn to safety net programs,” she said.
Other categories that exceeded the level of overall inflation year-over-year in July included shelter, up 3.7% in July; and transportation services, up 3.5%, and food, up 2.9% year-over-year in July.
The Bureau of Labor Statistics calculated, based on 2023 data, that older adults devote a higher share of spending than the general population to groceries, housing, utilities and health care. They spend less on areas like eating out and transportation, Horwich said.
Take four categories — food at home, housing, utilities and healthcare. For adults 65 and older, those four spending groups alone eat up 64.6% of their spending. By contrast, those categories add up to 49.8% of expenditures for adults age 45 through 54.
People age 65 and older dedicate 35.7% of their spending to housing, 8.3% of their spending to groceries, 7.2% to utilities and 13.4% to health care.
The average Social Security benefit as of July was $1,863.12 a month for all beneficiaries, including survivors benefits and disability benefits. The average for retired workers was $2,006.69 a month, based on monthly statistical snapshot provided by the Social Security Administration.
Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, said he too would estimate that the COLA increase would be around 2.7% for Social Security beneficiaries.
If so, a 2.7% COLA hike would translate into roughly an average increase of $50 a month for all beneficiaries beginning in 2026 — or roughly $600 a year.
Some retirees might be looking at an extra $54 or so a month beginning in 2026 — if they receive the average benefit of $2,006.69 a month.
Remember, though, many receive a monthly Social Security payment that’s smaller than average and could be looking at a $25 to $30 increase a month next year based on a 2.7% COLA hike.
Johnson, at the Urban Institute, maintains that many seniors are faring a bit worse this year in terms of inflation than the general population.
“Seniors devote a lot of their spending to medical care and housing, and those items have experienced sharper price increases than other items this year,” he said.
While tariffs pose a significant threat to retirees over the coming year, he said, price increases due to higher tariffs on imported goods are just now filtering down to consumer prices.
“So, they won’t be reflected much in this year’s COLA,” Johnson said.
It’s more likely, he said, that higher prices due to tariffs would translate to a larger COLA in 2027.
“That could force many retirees and people with disabilities to curb their spending in 2026,” he said.
Some relief is in sight next year for older adults, even if they aren’t collecting Social Security.
Many people age 65 and older will benefit when they file their federal income tax returns next year, if they’re able to claim a new temporary, bonus deduction of up to $6,000 for seniors. If both spouses are 65 or older, each could receive up to $6,000 or up to $12,000 total for the senior bonus deduction in a given tax year.
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Tax professionals call this a “special personal exemption” that aims to reduce the tax bill for many seniors. In general, seniors with high incomes would not qualify; lower income seniors who do not pay taxes would not benefit, either.
How much a senior who qualifies for the “senior bonus” will save on taxes will depend on their taxable income, which determines your marginal tax rate.
At a 12% marginal tax rate, for example, the $6,000 deduction for a single taxpayer who is 65 or older would result in $720 in tax savings.
At the same time, other costs are on track to go up.
Older adults must factor in rising costs for Medicare Part B premiums, which would be announced later in 2025.
Currently, the expectation is that Medicare Part B premiums will go up $21.50 a month in 2026 — climbing to $206.50 a month next year from $185 a month in 2025.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
This article originally appeared on Detroit Free Press: Social Security cost-of-living adjustment could hit 2.7% in 2026