Social Security Benefits Set to Rise in 2026—But Here’s Why You Might Be Worse Off!

The 2026 Social Security Cost-of-Living Adjustment (COLA) is expected to increase by 2.3%, up from earlier estimates of 2.1%. This adjustment is tied to inflation, which has risen moderately, as seen in the Consumer Price Index (CPI) data. While this COLA increase will provide some extra funds, retirees may find that it doesn’t go as far as expected due to rising costs in other areas, like housing and healthcare.

Here’s the catch: the 2.3% increase will raise the average monthly Social Security benefit by about $46. While this might sound like a helpful boost, the reality is that it might not be enough to keep up with rising living expenses. For example, shelter costs have risen by 4.4% in the past year, and medical care expenses are up by 2.7%. So, while you may see a bump in your benefits, your purchasing power may not increase as much as you’d hope.

But there’s more. If tariffs, particularly the ones imposed by the previous U.S. administration, continue, they could push inflation even higher. According to the Federal Reserve Bank of Boston, if tariffs on goods from countries like China, Canada, and Mexico stay in place, inflation could rise by up to 0.8 percentage points through 2025. And in the worst-case scenario, these tariffs could push inflation up by as much as 2.2 percentage points. That’s bad news for your wallet.

Tariffs generally lead to higher prices on imported goods, which means that the costs of everyday items could rise even further. While this could potentially lead to a larger COLA increase, it’s also a double-edged sword: higher inflation would eat away at the value of your benefits, making it harder to cover rising costs.

So, while the 2026 COLA increase might sound good at first, it’s important to keep in mind that inflation and tariffs could make your retirement funds feel stretched thinner than expected. The COLA increase will likely help, but it might not be enough to offset the impact of higher living expenses and the potential effects of ongoing tariffs.