When the Social Security Administration (SSA) announced last October that seniors would be getting a 2.5% cost-of-living adjustment (COLA), a lot of older Americans weren’t happy. The reality is that, historically speaking, a 2.5% Social Security COLA isn’t terrible. But in the context of more recent COLAs, it’s small.

At this point, though, seniors have been living with their 2.5% COLA for a couple of months. Now, retirees are looking ahead to 2026 and hoping for better news on the COLA front.

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So far, though, the numbers aren’t looking that rosy. The nonpartisan Senior Citizens League recently put out a COLA estimate for 2026. Based on inflation readings to date, it’s calling for a 2.3% increase to Social Security benefits in the coming year.

That’s clearly not great news for people who were already unhappy with a meager 2.5% raise. But that 2.3% projection is by no means set in stone. There’s a chance that 2026’s Social Security COLA could end up being far more generous.

Inflation could creep back upward

The Federal Reserve has been on a mission to cool inflation. To that end, it raised interest rates nearly a dozen times in 2022 and 2023 before eventually making a few rate cuts toward the end of 2024.

But the Fed paused interest rates at its last meeting, and is likely to do the same when it meets again in mid-March. The reason is that inflation has been stubbornly sticky.

That said, it’s possible that inflation will start to climb again in 2025. The implementation and enforcement of tariffs could drive the cost of consumer goods upward and also lead to key product shortages — a prime recipe for inflation.

If inflation levels rise as 2026 moves along, it could set the stage for a larger 2026 Social Security COLA. But that’s also not necessarily a good thing.

Generous COLAs are truly a mixed bag

It’s easy to look at a larger Social Security raise as a good thing. But because COLAs are tied directly to inflation, it’s important to recognize that larger ones don’t tend to do seniors much good.

Any time there’s a larger Social Security COLA, it’s on the heels of a stretch of rampant inflation. So seniors on Social Security may be better served in an environment of minimal inflation and smaller boosts to their monthly checks.

We won’t know what 2026’s Social Security COLA looks like officially until October rolls around. The reason is that COLAs are specifically calculated based on third-quarter inflation readings. But it’s not a bad idea for seniors on Social Security to prepare for either a smaller COLA, or a period of rising inflation that could fuel a larger COLA.

What does that mean? Retirees on tight budgets may not have much room for making cuts, so people in that boat should consider some type of work as a means of extra income.

Thankfully, the SSA does allow workers to collect benefits and earn money from a job at the same time. Those who do so before reaching full retirement age, though, are subject to withheld benefits for exceeding certain income thresholds. So anyone returning to work to better their finances should read up on the rules.

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