Social Security’s 2026 Cost-of-Living Adjustment (COLA) Will Include a Tariff-Related “Trump Bump” — Here’s How Much Extra You Can Expect
80% to 90% of retirees rely on Social Security income to some extent to make ends meet, which is why Social Security’s annual COLA announcement is so expected.
Donald Trump’s tariffs are creating a modest inflationary impact on domestic prices, which is expected to increase the 2026 COLA for Social Security recipients.
But several factors will make it difficult, if not outright impossible, for retirees to reap the full impact of the raises projected for next year.
In theory, the big day for more than 70 million Social Security traditional beneficiaries is less than a week away. Depending on whether the federal government shutdown will delay the release of important data (which I’ll get to in a moment), the Social Security Administration (SSA) is expected to release its much-anticipated cost-of-living adjustment (COLA) on October 15.
Based on nearly a quarter-century of Gallup annual research, Social Security income It’s more than just a monthly check-up. For 80% to 90% of retirees, this represents a necessary form of income that helps them cover their expenses in some sense. It is of great importance to know how much salary retirees will receive next year.
President Trump makes statements. Image source: Official White House Photo: Joyce N Boghosian, courtesy of the National Archives.
In its simplest form, Social Security’s cost-of-living adjustment is designed to help beneficiaries keep up with the inflationary pressures they are struggling with. If the cost of a large basket of goods and services increases by 3%, benefits will need to increase by the same amount to avoid a loss of purchasing power. This is where Social Security’s COLA comes into play.
Beginning in 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) became the measure of inflation that allowed nearly annual COLAs to be passed on to beneficiaries. There are more than 200 different spending categories in this index, each with their own unique percentage weightings. This allows CPI-W to be expressed as a single number when reported monthly by the U.S. Bureau of Labor Statistics (BLS) to determine whether prices are increasing (inflation) or decreasing (deflation) in aggregate.
However, only CPI-W readings in the third quarter (July, August and September) affect the COLA calculation. If the average CPI-W reading for the third quarter of this year is higher than the comparable period in the previous year, inflation has occurred and Social Security checks are poised to increase.
The year-over-year percentage difference in average third-quarter CPI-W readings, rounded to tenths of a percent, equals the cost-of-living adjustment passed on to recipients.
The potential problem now is that the BLS’s September inflation report is the last piece of the puzzle needed to calculate Social Security’s 2026 COLA. Failure to report most economic data during the federal government shutdown could lead to the release of this BLS data, thus delaying Social Security’s COLA announcement indefinitely.
When the BLS reports September inflation data on October 15 or later, Social Security’s more than 70 million traditional beneficiaries of retired workers, disabled workers, and surviving beneficiaries will be looking for another above-average “raise,” and they should get it.
Social Security COLAs have risen following the historic expansion of the U.S. money supply during the COVID-19 pandemic. From 2022 to 2025, beneficiaries saw their monthly payments increase by 5.9%, 8.7%, 3.2%, and 2.5%, respectively. This compares with an average increase of 2.3% from 2010 to 2025.
According to two independent estimates, the 2026 hike is predicted to be well above this 16-year average. Nonpartisan senior advocacy group Senior Citizens League (TSCL) is predicting a 2.7% COLA for next year. Meanwhile, Social Security and Medicare policy analyst Mary Johnson is calling for a slightly higher increase in payments of 2.8% in 2026. A COLA of 2.7% to 2.8% means an extra $54 to $56 per month for the average retired worker.
Both predictions share two common elements. First, TSCL and Johnson’s predictions point to the first moment of this century. In a jump that proves one of these two predictions correct, five consecutive COLAs are expected to reach or exceed 2.5% for the first time since 1997. From 1988 to 1997, beneficiaries’ payments increased by 2.6% to 5.4% each year.
The other common theme of these two independent estimates is that President Trump’s tariffs and trade policy have increased them modestly.
In early April, the president introduced trade policy that includes a 10% global tariff as well as higher “reciprocal tariffs” on dozens of countries deemed to have unfavorable trade balances with America. Although Trump’s starting tariff has been significantly modified due to agreements and adjustments announced since early April, it is still expected to provide an upward increase in the current inflation rate and thus Social Security’s cost-of-living adjustment.
Inside Do Import Tariffs Protect U.S. Companies?Writing for Liberty Street Economics, four New York Federal Reserve economists examined Donald Trump’s China tariff policy from 2018-2019 to determine its impact on American businesses and U.S. stocks. These economists focused specifically on the lack of differentiation paid in output and input tariffs as a problem for businesses in the United States.
Exit tariff is a tax imposed on the final product imported into the country. Meanwhile, input tariff is an additional tax imposed on goods used to complete the manufacture of a product domestically. Input tariffs risk making U.S. products less price competitive and could increase domestic prices. That’s probably where the modest “Trump increase” in Social Security benefits comes from.
Image source: Getty Images.
While a fifth year in a row with an above-average COLA, thanks in part to President Trump’s trade policy, sounds great on paper, it fails the sniff test when you get below the surface.
One of the biggest downsides that older recipients are expected to deal with next year is the significant increase in the Medicare Part B premium. Part B is the part of Medicare that handles outpatient services, and its premium is usually automatically deducted from the monthly payments of dual enrollees (retired workers who receive Social Security benefits and are enrolled in traditional Medicare).
In both 2024 and 2025, the Part B premium increased by 5.9%; This is already considerably higher than the 3.2% and 2.5% COLAs distributed in those years. The monthly premium for Part B is projected to increase 11.5% to $206.20 in 2026, according to the 2025 Medicare Trustees Report filed in mid-June. This would be the eighth time in the last quarter-century that the Part B premium has increased by a double-digit percentage from the previous year.
If this prediction proves accurate, the impact of the Social Security COLA will almost certainly diminish for most dual enrollees next year.
Another problem for buyers is that CPI-W is not doing them any favors. Just as the name suggests, this is an index that tracks the costs faced by “urban wage earners and office workers.” Most urban wage earners and clerical workers are not retired or are not currently receiving Social Security benefits.
According to data from the SSA, 87% of traditional Social Security recipients are 62 or older. Seniors spend a larger percentage of their budget on housing and medical care than working-age Americans. However, the CPI-W does not provide additional weight to these categories; This has led to a steady decline in the purchasing power of Social Security income since the beginning of this century.
Not a single move by Trump will help retirees overcome this seemingly no-win scenario in 2026.
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