Anticipating 2026's Social Security Cost-of-Living Adjustment: A Historical Perspective Reveals Potential Changes
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of the increase in the price of a theoretical basket of goods weighted for the average spending of a working-age city dweller, is at the heart of calculating the annual cost-of-living adjustment (COLA) for Social Security.
Gathered monthly by the Bureau of Labor Statistics from thousands of data points around the country, the CPI-W numbers provide valuable insights into the state of inflation in the United States.
In May 2025, the CPI-W number stood at 314.839, marking a 2.2% increase from May 2024. Historically, from May to September, the CPI-W reading tends to increase by about 1.3%.
The Social Security COLA is automatically calculated by the government based on the CPI-W. It is determined by the average year-over-year increase in the CPI-W for the third quarter of the year. The Social Security Administration announces the following year's COLA once the September CPI-W numbers are released.
If inflation continues to follow its historical average, next year's COLA could be around 3%. However, experts and social security trustees have a more moderate outlook, predicting a COLA between 2.4% and 3%, with 2.7% as their intermediate assumption.
Recent forecasts from the Senior Citizen's League and independent analyst Mary Johnson align with these predictions, expecting a 2.5% COLA for 2026. These predictions are based on low inflation and weak economic growth forecasts for 2026, as reflected in the Swiss National Bank's inflation projections of 0.5% for 2026 and economic growth around 1.1% to 1.4% in Germany and Switzerland.
Social Security plays a significant role in the income of many American retirees. About half receive at least 50% of their income from it, and one-quarter receive 90%. The annual COLA is crucial for many seniors, as it helps them keep up with rising costs of living.
We are still a little over a month away from getting the first data point that counts toward next year's COLA. As we get closer, retirees will get more clarity on what to expect for the 2026 COLA. The September CPI-W numbers, to be released in early October, will determine the following year's Social Security COLA.
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