In October, the Social Security Administration will announce the cost-of-living adjustment (COLA) for 2026. National projections indicate that this year’s hike will be the smallest we’ve experienced in recent memory. Mary Johnson, an independent Social Security and Medicare policy analyst, writes that the expected COLA for 2026 is 2.4%. This analysis is bolstered by testimony from The Senior Citizens League. This figure represents a fall from the 2.5% raise that beneficiaries received in 2025. This would be a major departure from annually applying an inflation adjustment for retirees, disabled workers, and their families.
The COLA is calculated by comparing inflation data from the third quarter of the current year to that of the previous year. This year’s expected change is no ordinary adjustment. If so, it will be the lowest since 2021, the year we allowed in a 1.3% increase. Indeed, by April CPI-U inflation was down to a 12-month 2.3%. That would be the lowest annual rate since 2021, based on the consumer price index overall.
The Social Security cost-of-living adjustment for 2026 is on a path toward historic territory. If so, it will be the smallest benefit increase we’ve seen in five years. As Johnson notes, proposals to change drug prices are likely to do nothing to address this COLA estimate. He points out that the larger economic picture may be a big factor. If tariffs on imported goods are applied, these tariffs would contribute to raising inflation. This effect can start to be felt in the months preceding an official announcement.
This year is going to be a historical year to watch with respect to the tariffs, Johnson told lawmakers. He was indeed talking around the recalculated 2026 COLA estimate, which is fluctuating each month as we receive new inflation data. The combination of these economic factors will first work to calculate the year-over-year change that makes up the annual increase.
The effects of rising prescription drug costs have recently received more attention within the realm of Social Security benefits. President Donald Trump signed a new executive order this week aimed at bringing down high prescription drug costs. Organizations such as the AARP Public Policy Institute, which advocates on behalf of Americans 50 and over, celebrated this decision. Leigh Purvis is AARP’s director of health services research and principal for prescription drug policy. She knew that most Americans are crystal clear on just how expensive prescription drugs can be.
“A lot of people are aware that prescription drug prices are too high, and I think a lot of people are aware that we’re paying a lot more than other countries,” – Leigh Purvis
Now is the time Purvis stressed that any legislative action to bring down the price of drugs would be popular with the public.
“So any efforts moving us in the direction of paying less and paying something that’s more comparable to the rest of the world, I think is something that people could probably get behind,” – Leigh Purvis
The Social Security Administration is preparing for its big annual announcement. Beneficiaries certainly aren’t the only ones anxiously anticipating how these economic winds will impact their overall economic security. Inflation rates are rising and possible policy changes may be coming just over the horizon. The next COLA has the potential to alter the financial outlook for millions of Americans.