Cooling COLAs: Early Forecast for 2026 Social Security Adjustment Predicts Another Drop
Cooling inflation could lead to the lowest Social Security COLA for next year since the start of the COVID-19 pandemic, according to a forecast released today by The Senior Citizens League.
Next COLA Update: Updated 2026 Social Security COLA Forecasts Now Calling for 2.2% Bump
Previous COLA Update: Initial 2026 Social Security COLA Prediction: 2.5%
All COLA Updates: Social Security Cost of Living Adjustment (COLA)
TSCL’s COLA model predicts that the 2026 Social Security cost of living adjustment will come in at 2.1%, down from its initial forecast of 2.5% released back in December.
The updated forecast is based on this morning’s announcement from the Bureau of Labor Statistics, which showed the CPI-W (the index used to calculate the COLA) came in at 2.8% in December 2024.
Each month, TSCL issues a new prediction of the next COLA for Social Security using our statistical model. The model incorporates the Consumer Price Index, the Federal Reserve interest rate, and the national unemployment rate. The model’s predictions update throughout the year, adjusting in response to economic conditions. TSCL released a new version of the model, v1.2, in January 2025. The new version updates the model’s use of dates, processing data according to the federal fiscal year instead of the calendar year. The new model also reduces each prediction’s reliance on previous predictions made throughout the federal fiscal year.
As shown in the chart below, 2025’s COLA was just 2.5%, down from 3.2% in 2024 and a whopping 8.7% in 2023. The last time the COLA came in below 2.0% was 2021, when it was 1.3% due to low inflation during 2020.
If SSA announced the 2026 COLA today, using data from October to December instead of July to September, TSCL said it would come in at 2.6%.
This downward trend for COLAs comes amid a period of serious financial struggle for American seniors: TSCL survey data suggest that two-thirds (67%) of seniors depend on Social Security for more than half their income. And 62% of older Americans worry that their retirement income won’t even cover essentials like groceries and medical bills.
The Senior Citizens League says that while slowing inflation is a good thing, it doesn’t mean prices will fall—just that they’ll rise more slowly. This leaves many seniors facing a budget shortfall, and is why TSCL supports President Elect Trump’s campaign promise of eliminating taxes on Social Security benefits.
“The Trump Administration’s plan to eliminate taxes on Social Security benefits would make a massive difference,” said TSCL Executive Director Shannon Benton in a statement today. “The current thresholds used to determine if you’ll pay taxes on your benefits were set up back in the 1980s, and we’ve never adjusted them for inflation.”
TSCL estimates that eliminating the tax on Social Security benefits could save a typical senior about $3,000 a year, which the organization says comes out to about 5% of a typical senior budget.
While Trump’s pledge to end taxation of Social Security benefits would help many seniors in the short term, without an offset (none has been provided by the Trump camp to date), doing so would also hasten Social Security’s looming insolvency.
According to the most recent Social Security Board of Trustees annual report released in May 2024, the Social Security trust fund will become depleted in 2033 absent congressional action—at which time only 79% of scheduled benefits would be payable.
If the tax on Social Security benefits were to end without an offset, a recent estimate by the nonpartisan Committee for a Responsible Federal Budget (CRFB) found that insolvency window would shrink to only 6 years—by 2031 instead of 2033. Under CRFB’s central estimate, ending the income taxation of Social Security benefits would add about $950 billion to Social Security’s cash deficit between FY 2026 and 2035.
SEE ALSO:
• Initial 2026 Social Security COLA Prediction: 2.5%
• Second Trump Presidency: End of Tax on Social Security Benefits?
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
