Tariffs and Social Security: What Seniors Need to Know About the 2026 COLA

Seniors relying on Social Security are increasingly anxious about the impact of tariffs on their fixed incomes. According to a Nationwide Retirement Institute survey, 50% of retirees are “terrified” about how tariffs could erode their retirement savings, and over 60% believe the 2026 Social Security Cost-of-Living Adjustment (COLA) won’t keep up with tariff-driven inflation. Tariffs, particularly those as high as 50% on imports from countries like India and 145% on Chinese goods, are expected to raise the cost of essentials like food, prescription drugs, and medical equipment, which hit seniors especially hard.

Tina Ambrozy, head of strategic customer solutions at Nationwide, told Yahoo Finance, “Seniors feel squeezed from all sides, and the uncertainty around tariffs and rising inflation is adding a new layer of financial stress.” With the average Social Security benefit around $2,000 per month, even modest price increases can strain budgets already stretched thin.

The 2026 COLA Projection and Its Limitations

The Senior Citizens League projects the 2026 COLA at 2.7%, slightly higher than the 2025 COLA of 2.5%, which increased the average monthly benefit by about $50 for the 70 million retired and disabled workers. This estimate is based on July’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which rose 2.7% year-over-year. However, the final COLA will depend on third-quarter inflation data (July, August, and September), with the Social Security Administration announcing the official figure in mid-October 2025.

While a 2.7% increase may seem promising, it may not fully address the rising costs seniors face. Expenses like shelter, electricity, hospital care, and outpatient medical services are outpacing overall inflation, according to the Bureau of Labor Statistics. Economist Seema Shah from Principal Asset Management warns that “inflation calm is unlikely to last,” as tariff effects may surface in late 2025, potentially driving prices higher than the COLA can offset.

Why Tariffs Could Outpace COLA

Tariffs increase the cost of imported goods, which businesses often pass on to consumers, leading to higher inflation. For seniors, this means pricier essentials like medications (with up to 400 drug products from Canada alone affected) and groceries. Mary Johnson, a Social Security expert, notes that food costs are already climbing due to factors like weather and geopolitical issues, compounding tariff impacts. Additionally, a lag exists between tariff-driven price hikes and COLA adjustments, meaning seniors may face higher costs for months before benefits catch up. Kathleen Romig from the Center on Budget and Policy Priorities emphasizes that while Social Security is inflation-protected, “there’s a lag” in reflecting tariff-related inflation.

Shannon Benton, executive director of The Senior Citizens League, highlights that many seniors already feel the 2025 COLA was insufficient, with benefits growing slower than their actual expenses. This gap forces retirees to cut back on both discretionary and essential spending, amplifying financial stress.

Strategies to Mitigate Tariff Impacts

Seniors can take proactive steps to safeguard their finances amidst tariff-driven inflation:

• Budget Adjustments: Prioritize essential spending and cut non-essentials, like dining out or subscriptions. Use senior discounts or shop at bulk retailers to reduce grocery and household costs.

• Supplement Income: Consider part-time work or gig economy opportunities, such as ridesharing or freelance consulting, if health permits. Even a few hours weekly can offset rising costs.

• Leverage Assistance Programs: Explore programs like Medicare Part D Extra Help for prescription drug savings or Supplemental Nutrition Assistance Program (SNAP) for food support.

• Advocate for Change: Support efforts to reform COLA calculations, such as switching to the Consumer Price Index for the Elderly (CPI-E), which better reflects senior spending patterns. Contacting congressional representatives can amplify this push.

• Financial Planning: Consult a financial advisor to optimize withdrawals from savings accounts like IRAs or 401(k)s to cover shortfalls without depleting funds too quickly.

Looking Ahead

The 2026 COLA’s ability to counter tariff-driven inflation remains uncertain, but seniors can prepare by staying informed and proactive. The Senior Citizens League and other advocacy groups are calling for tariff exemptions on critical items like drugs and medical equipment to ease the burden on retirees. While a 2.7% COLA offers some relief, its effectiveness will depend on how quickly inflation accelerates in late 2025.

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