COLA 2026 Forecast Reveals Smallest Social Security Hike in Five Years

An early forecast for the 2026 Social Security COLA points to the smallest increase since 2021. As inflation slows, benefits are expected to grow more modestly, leaving many retirees bracing for limited financial relief. The impact could be felt widely among fixed-income households. Policy shifts and market changes could still influence the final outcome.

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COLA 2026 forecast
COLA 2026 forecast. credit : shutterstock | en.Econostrum.info - United States

A preliminary forecast for the 2026 Social Security cost-of-living adjustment (COLA) suggests an increase of just 2.4 percent—marking the smallest adjustment since 2021, according to the Senior Citizens League (TSCL). Though slightly higher than last month’s 2.3 percent prediction, the figure remains below the 2.5 percent increase already confirmed for 2025.

This new estimate follows several years of elevated benefit increases driven by pandemic-related inflation, including adjustments of 5.9 percent in 2022 and 8.7 percent in 2023. Analysts say the dip reflects broader economic stabilisation, though it may pose challenges for seniors whose income depends heavily on these annual revisions.

Inflation Stabilises but Benefit Growth Slows

The Social Security Administration calculates COLA based on year-over-year changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter of the year. The most recent CPI-W data, for the 12 months ending April 2025, showed a rise of 2.1 percent, according to the Bureau of Labor Statistics.

This cooling inflation trajectory has direct consequences for the 70 million Americans who receive Social Security benefits. “This year will be a closer year to watch because of the tariffs,” said Mary Johnson, an independent Social Security and Medicare analyst, speaking to CNBC. Her comment reflects growing uncertainty about trade policy impacts on domestic prices, which feed into the COLA formula.

Economists warn that, even with slower inflation, consumer prices are not declining—only rising at a less aggressive pace. “What many fail to understand about inflation, a 10 percent increase on prices followed by a much lower increase the following year is still an increase,” said Kevin Thompson, CEO of 9i Capital Group, to Newsweek.

Policy Changes Could Influence Future Cost Dynamics

Parallel to economic indicators, policy shifts may also influence senior budgets in the coming year. On 12 May, President Donald Trump signed an executive order aiming to reduce prescription drug costs by requiring pharmaceutical companies to match prices paid in other countries or face federal reimbursement caps.

Experts believe this could affect how seniors experience out-of-pocket medical expenses. “Any efforts moving us in the direction of paying less … is something that people could probably get behind,” said Leigh Purvis of the AARP Public Policy Institute, in comments to CNBC.

Still, the executive order may face legal pushback, adding uncertainty to its timeline and impact. As these developments unfold, the Social Security Administration is expected to release the official 2026 COLA figure in October, based on third-quarter inflation metrics.

Financial educator Alex Beene told Newsweek that while the smaller COLA may appear discouraging, it signals broader price stabilisation. “Not having to dramatically increase beneficiary spending shows prices are stabilising, even if they’re still higher than they were five years ago,” he said.

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