July Is an Important Month for Social Security. Here's Why.

If you're someone who relies heavily on Social Security for income, then the program's annual cost-of-living adjustments, or COLAs, are probably pretty important to you. In 2025, Social Security benefits got a 2.5% raise. And at this point, a lot of people are eager to know what 2026's Social Security COLA will amount to.

As of today, it's too soon to have that answer. But July is an important month for Social Security in the context of COLAs and could soon provide a clue as to what sort of increase benefits will get in the new year.

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Why July matters so much for Social Security

The purpose of Social Security COLAs is to help beneficiaries maintain their buying power from one year to the next. The reason automatic COLAs were signed into law is that without them, inflation can easily erode seniors' buying power.

Social Security COLAs are calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks changes in the cost of common goods and services. If there's a rise in the CPI-W from one year to the next, Social Security benefits increase. If there's no increase or if there's a decrease, there's no COLA.

Luckily, Social Security benefits themselves cannot decrease from one year to the next. Put another way, there's no such thing as a negative COLA.

Meanwhile, Social Security COLAs are specifically based on third-quarter CPI-W data. So July's numbers are the first that will be used in the formula that calculates next year's COLA.

What the experts are saying so far

Based on the CPI-W data we have so far this year, the Senior Citizens League, an advocacy group, predicts that 2026's Social Security COLA will be 2.5% -- the exact same raise benefits got this year. However, that number could change significantly based on how inflation trends during the third quarter of the year.

If tariff policies end up driving prices upward, it could lead to a rise in inflation and a larger COLA for Social Security recipients next year. If inflation doesn't pick up too much, that 2.5% COLA projection could end up being pretty accurate.

Ultimately, the Social Security Administration will not be able to make an official COLA announcement until October. That's because it needs to wait until September's CPI-W data is gathered.

What to do now

If you're someone who collects Social Security and you're already struggling to keep up with your living costs, you may want to make some changes in the near term, regardless of what next year's COLA amounts to. Remember, a more generous COLA means an uptick in inflation. So while you may prefer a larger COLA to a stingy one, either scenario could have a negative effect on your finances.

If money has been tight, it could pay to try to lower some of your larger expenses. Downsizing your home, for example, could be extremely helpful. You can also look at rejoining the labor force by working part-time. This is something you're allowed to do while collecting Social Security, and it could be a great way to supplement those benefits.

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