Social Security Cost of Living Adjustment (COLA) for 2026 Will Include a Rate-Related Adjustment "triumphant blow" — Here’s how much extra you can expect

• Between 80% and 90% of retirees rely on their Social Security income in some way to make ends meet, which is why the annual Social Security COLA disclosure is so eagerly awaited.

• Donald Trump’s tariffs are having a modest inflationary impact on domestic prices, which is expected to boost the 2026 COLA for Social Security beneficiaries.

• However, a couple of factors will make it difficult, if not downright impossible, for retirees to enjoy the full impact of next year’s planned increase.

• The $23,760 Social Security bonus that most retirees completely overlook ›

In theory, the big day is less than a week away for the more than 70 million traditional Social Security beneficiaries. Depending on whether or not the federal government shutdown delays the release of key data (which I’ll address in a moment), the Social Security Administration (SSA) is expected to announce the long-awaited cost of living adjustment (COLA) on October 15.

According to nearly a quarter-century of annual Gallup polls, Social Security income is more than just a monthly check. For between 80% and 90% of retirees, it represents a necessary form of income that helps them, in some way, cover their expenses. It is of great importance to know how much retired workers will receive next year.

But next year’s surge will be unlike anything we’ve ever witnessed before. Due to President Donald Trump’s recently implemented trade and tariff policy, independent estimates predict a “Trump push” of sorts for Social Security’s 2026 COLA.

In its simplest form, the Social Security cost-of-living adjustment is designed to help beneficiaries keep up with the inflationary pressures they face. If the cost of a large basket of goods and services increases by 3%, profits would also have to increase by the same percentage to avoid a loss of purchasing power. This is where the Social Security COLA comes into play.

Beginning in 1975, the Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W) became the inflation measure that allowed nearly annual COLAs to be passed on to beneficiaries. This index has over 200 different spending categories, each of which has its own unique percentage weightings. This allows the CPI-W to be expressed as a single figure when reported monthly by the U.S. Bureau of Labor Statistics (BLS) to determine whether prices, as a whole, are increasing (inflation) or decreasing (deflation).

However, only the CPI-W readings from the third quarter (July, August and September) are taken into account in the COLA calculation. If the average CPI-W reading for the third quarter of the current year is higher than the comparable period of the previous year, inflation has occurred and Social Security checks will increase.

The year-over-year percentage difference in average third-quarter CPI-W readings, rounded to the nearest tenth of a percent, is equivalent to the cost-of-living adjustment passed on to beneficiaries.

The potential problem right now is that the BLS’ September inflation report is the last piece of the puzzle needed to calculate Social Security’s 2026 COLA. Since most economic data was not reported during the federal government shutdown, it is possible that this BLS data release, and therefore the announcement of the Social Security COLA, may be delayed indefinitely.

When the BLS reports September inflation data, either on October 15 or at a later date, the more than 70 million traditional Social Security beneficiaries, which include retired workers, workers with disabilities and surviving beneficiaries, will be looking for another above-average “boise,” and they should get it.

Following a historic expansion of the U.S. money supply during the COVID-19 pandemic, Social Security COLAs skyrocketed. From 2022 to 2025, beneficiaries saw their monthly payments increase by 5.9%, 8.7%, 3.2% and 2.5%, respectively. This compares to an average increase of 2.3% from 2010 to 2025.

According to two independent estimates, the 2026 increase is expected to be much higher than this 16-year average. Nonpartisan senior advocacy group the Senior Citizens League (TSCL) predicts a COLA of 2.7% next year. Meanwhile, Social Security and Medicare policy analyst Mary Johnson calls for a slightly larger 2.8% increase in payments in 2026. A 2.7% to 2.8% COLA equates to an extra $54 to $56 per month for the average retired worker.

Both estimates share two common elements. First of all, TSCL and Johnson’s forecasts imply a moment typical of the first of this century. If either of these two forecasts proves accurate, it would be the first time since 1997 that five consecutive COLAs have reached or exceeded 2.5%. From 1988 to 1997, beneficiary payments increased between 2.6% and 5.4% each year.

The other common theme of these two independent estimates is that President Trump’s trade and tariff policy has raised them modestly.

In early April, the president unveiled his trade policy, which involved a 10% global tariff as well as higher “reciprocal tariffs” for dozens of countries considered to have adverse trade balances with the United States. Although Trump’s initial tariff has been significantly altered by agreements and adjustments announced since early April, it is expected to have an increase in the prevailing inflation rate and, therefore, Social Security’s cost-of-living adjustment.

In Do import tariffs protect American companies?Four New York Federal Reserve economists, writing for Liberty Street Economics, examined Donald Trump’s 2018-2019 China tariff policy to determine its impact on U.S. businesses and stocks. These economists specifically focused on the lack of paid differentiation between output and input tariffs as a problem for American businesses.

A production tariff is a duty that is applied to a finished product imported into the country. Meanwhile, an input tariff is an additional tax levied on a good used to complete the manufacturing of a product in the country. Input tariffs risk making U.S. products less price competitive and may increase domestic prices. This is likely where Trump’s modest “boost” in Social Security benefits comes from.

While a fifth consecutive year with an above-average COLA, thanks in part to President Trump’s trade policy, may look great on paper, it doesn’t pass the sniff test once you dig below the surface.

One of the biggest hurdles elderly beneficiaries are expected to face next year is a notable increase in the Medicare Part B premium. Part B is the segment of Medicare that handles outpatient services, and its premium is often automatically deducted from the monthly payment of dual enrollees (retired workers who receive a Social Security benefit and who are enrolled in traditional Medicare).

In both 2024 and 2025, the Part B premium increased by 5.9%, which is already considerably higher than the 3.2% and 2.5% COLAs handed out in those years. According to the 2025 Medicare Trustees Report submitted in mid-June, the monthly Part B premium is projected to increase 11.5% to $206.20 in 2026. It would be the eighth time in the last quarter century that the Part B premium has increased by a double-digit percentage year over year.

If this estimate proves accurate, it would almost certainly reduce the impact of the Social Security COLA for most dual enrollees next year.

Another problem for the beneficiaries is that the CPI-W is not doing them any favors. As its full name shows, it is an index that tracks the costs faced by “urban wage earners and white-collar workers.” Most urban wage earners and white-collar workers are neither retired nor currently receiving a Social Security benefit.

According to SSA data, 87% of traditional Social Security beneficiaries are 62 years old or older. Seniors spend a larger percentage of their budget on housing and health care services than working-age Americans. However, the CPI-W does not provide additional weighting to these categories, which has led to a steady loss of purchasing power of Social Security income since the beginning of this century.

Not even a push from Trump will help retirees overcome this seemingly hopeless scenario in 2026.

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Social Security’s 2026 Cost of Living Adjustment (COLA) Will Include ‘Trump Boost’ Related to Rates: Here’s What You Can Expect Additional was originally published by The Motley Fool