Social Security COLA for 2026 set to rise modestly following latest inflation data

Advisors tracking Social Security’s annual cost-of-living adjustment (COLA) for clients can expect a modest increase in 2026, with the latest government data showing inflation holding steady.

The Bureau of Labor Statistics reported Tuesday that the Consumer Price Index for All Urban Consumers (CPI-U) rose 2.7% over the past year, while the core inflation rate – stripping out food and energy – was up 3.1%.

The BLS data report also showed a 2.5% increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the benchmark used to determine the COLA.

With the official numbers in for July, analysts now forecast the 2026 COLA to land in the range of 2.6% to 2.7%, a figure that would translate to an increase of about $50 per month for the average retired worker, who saw a benefit of $2,006 as of last month. Survivor and disability benefits are also set for smaller dollar increases in line with their respective averages .

The COLA is calculated by averaging the CPI-W for July, August, and September and comparing it to the same period the previous year. The final figure, to be announced in October, will determine the adjustment to monthly benefits beginning in January.

For seniors, the inflation readings in key spending categories are particularly relevant. The shelter index, which includes rent and owners’ equivalent rent, rose 3.7% over the past year up to July. Medical care services increased 4.3%, and food prices were up 2.9%.

Within food, the cost of eating out rose 3.9%, while grocery prices climbed 2.2%. Energy prices, on the other hand, declined 1.6% year over year, with gasoline down 9.5% but electricity up 5.5% and piped gas service up 13.8%.

“Sometimes the COLA will understate rising costs faced by people with disabilities and the elderly who depend on Social Security benefits,” Indivar Dutta-Gupta, a distinguished visiting fellow with the National Academy of Social Insurance, told AARP, the advocacy group representing seniors and retirees.

Mike Lynch, managing director of applied insights at Hartford Funds, noted that while the COLA is important, it is also crucial for retirees to consider the broader retirement landscape.

“It’s not our parents’ or grandparents’ retirement anymore,” Lynch told AARP. “It’s probably going to be a lot longer, a lot more active, which means they’re going to need more money."

The next two inflation readings for August and September could prove crucial for retirees relying on Social Security benefits. 

Teresa Ghilarducci, a labor economist at New York City’s New School for Social Research, aired concerns over a potential uptick in inflation because of tariffs over the remainder of this year. If the COLA formula ends up yielding a modest bump, she told AARP it "probably won’t be enough to cover the inflation rates that we’re headed into."

The COLA mechanism, automatic since 1972, remains a vital feature of Social Security, providing the only inflation-protected income for many retirees. However, as inflation patterns shift and essential expenses rise, advisors may want to help clients reassess their retirement income strategies and consider how even modest adjustments may affect long-term financial security.