Having helped someone else through a similar update issue, I'm going to assume you're using the Ansible deploy method.

If you're using the Ansible playbook method, and don't understand every single step the playbook is doing, I recommend deploying Lemmy manually.

It sounds like your Posgres password changed in the playbook variables and got set to a new value in the lemmy config and docker-compose files. But once a Postgres DB is initialized, the env vars for the initial DB, user, and password are no longer needed/processed. Thus, your compose file, playbook, and lemmy config have a different password than what Postgres was setup with.

Try shelling into your Postgres container and re-setting the password for the Lemmy user to what's defined in the lemmy config and compose file and seeing if that gets you past the incorrect password error.

So you don't have the root database password, or just the Lemmy user password?

Might be worth it to make a new database and create a new Lemmy user and migrate data from the backup.

I found this article which might help: https://www.postgresqltutorial.com/postgresql-administration/postgresql-reset-password/

I've only ever used Maria dB so YMMV.