The complete effects of tariffs on the cost-of-living adjustment (COLA) for Social Security in 2026 remain uncertain.
According to the Social Security Administration, millions of American seniors depend on Social Security for the majority of their income. For households with individuals aged 65 and older, this reliance is substantial, emphasizing the significance of the annual COLA in helping them manage the increasing costs of goods and services. Although the exact COLA for Social Security beneficiaries in 2026 will be determined in about six months, early indicators suggest that the upcoming increase might not meet seniors’ expectations.
Tariffs could potentially alter this scenario. The current situation and the impact tariffs could have on benefits in the coming year remain a focal point.
Since the beginning of monthly Social Security payments in 1940, Congress automated the COLA calculation system in 1975. The adjustment provides an alignment of Social Security benefits with the cost of living and is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a monthly figure from the Bureau of Labor Statistics that aggregates price changes across more than 200 spending categories. The Social Security Administration calculates COLA using the average year-over-year increase in the CPI-W during the third quarter, which is applied the following year. If this calculation yields a negative result, beneficiaries will not see any adjustments.
Critics argue that the CPI-W may not accurately reflect the current costs faced by seniors. In 1987, the Bureau of Labor Statistics introduced the Consumer Price Index for the Elderly (CPI-E), designed to better align with the spending patterns of those aged 62 and older. Some advocate for the COLA to be based on the CPI-E. Despite variations between the CPI-E and CPI-W, both have produced similar cumulative results over the past 15 years. At present, the Social Security Administration continues to use the CPI-W. A forecast suggests this could result in a lower-than-expected COLA for 2026.
The Senior Citizens League, a senior advocacy organization, updates its COLA forecast following each monthly CPI release from the Bureau of Labor Statistics. The latest release on April 10 indicated a 2.2% increase in the CPI-W for March compared to the previous year, a decrease from the February and January increases of 2.7% and 3% respectively. Consequently, the forecast for the 2026 COLA was adjusted to 2.3%, still lower than the 2025 COLA of 2.5% and a notable slowdown from the rates between 2021 and 2024, which might not suffice for many seniors’ financial needs.
March data showed minimal impact from tariff policies implemented during President Trump’s administration. Thus, the forecast by The Senior Citizens League does not account for potential COLA changes due to increased prices of imported goods.
Tariffs have yet to exhibit their full impact. Although significant tariffs planned for countries with large trade surpluses with the United States have been mostly paused, a 10% tariff on all imports, along with 25% tariffs on auto parts and goods from Mexico and Canada, remain. Tariffs on Chinese imports stand at 145% as of the latest information.
These tariffs could affect the prices of various consumer goods, from automobiles to groceries, clothing, and prescription drugs, given the United States’ dependency on international trade. Some suggest tariffs might strengthen the dollar, mitigating tariff consequences, but most economists predict these taxes will lead to increased inflation. Additionally, the U.S. Dollar Index has recently declined to a three-year low following the tariff announcements.
The effects of tariffs might not be immediate but are expected to be noticeable by summer, coinciding with the calculation period for next year’s COLA. This could result in a higher COLA for seniors, albeit with a considerable lag between the CPI readings and COLA implementation. These seniors could face challenges in coping with tariff-driven inflation while anticipating a 2026 COLA sufficient for their needs.
A stable, moderate inflation rate is generally preferred as it allows the COLA to accurately correspond to rising costs. However, achieving this scenario seems unlikely under the current tariff conditions.
