For millions of retirees, Social Security is more than just a monthly check – it’s a foundational puzzle piece to their financial well-being. The annual cost-of-living adjustment (COLA) announcement in October is always closely watched, and this year’s reveal may bring a boost in benefits due to President Trump’s tariff and trade policies.
Social Security’s COLA serves one purpose: to help beneficiaries avoid losing buying power due to inflation. It increases benefits by the same percentage that a basket of goods and services used by Social Security recipients rises in cost. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) calculates this adjustment, taking into account over 200 spending categories.
However, the COLA calculation has its quirks. Only CPI-W readings from the third quarter matter, which means beneficiaries can expect a higher monthly payout if the average CPI-W reading in the third quarter of 2025 is higher than in the comparable period of 2024.
Forecasts suggest a “Trump bump” may boost Social Security benefits in 2026, with estimates ranging from 2.1% to 2.7%. If these forecasts prove accurate, beneficiaries will enjoy their fifth straight year with an above-average cost-of-living adjustment. However, this increase is unlikely to make a significant dent in the loss of purchasing power that retirees have been contending with.
The CPI-W has inherent flaws that give retirees the short end of the stick. It tracks the spending habits of “urban wage earners and clerical workers,” who spend their money differently than seniors. The index doesn’t provide added weighting to important categories for retirees, such as shelter and medical care services, which have consistently been higher in inflation rates.
Until the costs that matter most to retirees garner more weight in the inflationary index or see a significant reduction in their respective inflation rates, the purchasing power of a Social Security dollar is likely to wither.
Source: https://www.fool.com/retirement/2025/07/20/trump-bump-forecast-into-social-security-2026-cola