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Tariffs imposed by President Donald Trump contributed to higher prices in 2025, which in turn contributed to higher Social Security cost-of-living adjustments for 2026. There is debate over whether the COLA is enough to offset overall inflation.
according to federal Reserve According to the data, the personal consumption expenditure (PCE)-weighted average impact of the tariffs on prices during the first eight months to 2025 was 0.87%. Partly due to tariff effects, The 2026 COLA was approved at 2.8% – Up from last year’s COLA 2.5%.
The annual COLA is designed to give Social Security beneficiaries a monthly pay increase to help cope with higher prices. But many beneficiaries will not feel much relief in their pockets. Here’s a look at why that’s the case.
old cola formula
Even before the Trump tariffs raised prices, Social Security’s COLA formula had come under fire from a wide range of critics. The formula is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does not account for senior-specific expenses such as increases in Medicare Part B premiums.
“For years, Social Security’s cost-of-living adjustment has failed to keep up with the real cost increases facing seniors,” Shannon Benton., Executive Director of Senior Citizens Leaguetold GOBankingRates. “Although the COLA is intended to protect beneficiaries from inflation, it relies on an inflation formula that does not accurately reflect how elderly Americans spend their money.”
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A major problem is that seniors spend a greater share of their income on housing, prescription drugs, utilities and health care than other age groups.
Housing, medical care inflation outpaces overall inflation
Since housing and medical care are such large expenses for seniors, it helps to compare those inflation rates with overall inflation to determine the effectiveness of the COLA.
here is one motley flower The breakdown shows how the average CPI-W inflation rate compared to housing and medical care through the third quarter of 2025, when this year’s COLA was calculated:
- Overall CPI-W Inflation: 2.8%
- housing inflation: 3.9%
- medical care inflation: 3.6%.
no relief this year
This year’s latest inflation figures reflect a challenging environment for senior citizens. data from US Bureau of Labor Statistics Found that overall inflation rose 2.3% year-on-year in February, with housing inflation coming in at 3.3% and medical care inflation at 3.4%.
Seniors who rely on Medicare will find it especially difficult to make ends meet, according to CPA and attorney Chad Cummings. Cummings and Cummings Law Who previously worked in finance and tax.
“The 2.8% Social Security COLA adds about $56 per month to the average benefit, but the nearly $18 per month increase in Medicare Part B premiums absorbs a third of that benefit before a retiree can buy a single item,” he told GOBankingRates.