The Social Security cost-of-living adjustment (COLA) for 2026 is currently estimated at 2.2%, following March’s inflation report. However, experts suggest that tariffs could significantly influence the final COLA. Tariffs not only affect markets but also impact Social Security recipients and their expected cost-of-living adjustments.
Based on the slower-than-expected annual March inflation report, the estimated COLA for 2026 stands at 2.2%, according to Mary Johnson, a retired Social Security policy analyst who continues to track the data. In March, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—used to calculate Social Security adjustments—showed a price decrease, bringing the inflation rate to 2.2%. This marks the lowest annual increase since September and falls short of economists’ average forecast of 2.6%, though it remains higher than the Federal Reserve’s 2% target.
However, the uncertainty surrounding President Trump’s tariff plans for the remainder of the year means that the COLA estimate could still change significantly. Johnson noted that a trade war with China or increased tariffs on other trading partners would lead to higher inflation, potentially resulting in an increased COLA.
Tariffs and their impact on COLA
While a higher COLA might seem beneficial for seniors, it doesn’t fully compensate for the rising costs of essential items. Medical care services, food, electricity, and hospital-related services have all seen price increases that outpace the inflation rate used for COLA calculations. Johnson also pointed out that higher consumer prices, home repair costs, and changes in health are forcing older consumers to spend savings more quickly, compounded by stock market volatility affecting retirement accounts.
Another topic of interest is the potential abolition of Social Security taxes. Many seniors, including David Alston of Woodbridge, New Jersey, argue that taxing Social Security benefits constitutes double taxation. “You pay taxes for years while you’re working, then after you file to get your benefits, the government taxes them again,” Alston said.
Despite the appeal of lower taxes, Johnson warns that eliminating taxes on Social Security benefits could have unintended consequences. This proposal could reduce the funds necessary for Social Security and Medicare, potentially leading to benefit cuts or higher healthcare costs. Taxation of Social Security benefits in 2025 is expected to provide about 4% of the income needed for retirees’ benefits and 10% of Medicare costs.
Photo by; cottonbro studio on Pexels