There are millions of Social Security beneficiaries who can expect an increase in Cost-of-living Adjustment (COLA) in 2026. However, it must be noted that the current projections show that it might be a slight increase as compared to the previous years. The COLA is estimated to increase between 2.1% and 2.4%.
When Will the Official COLA Be Announced?
The Social Security Administration (SSA) determines the annual COLA by calculating inflation. The SSA utilises the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for this calculation. This index identifies the change in prices of goods and services which are commonly purchased by working class Americans.
How Is the COLA Calculated?
Annually, the SSA makes a comparison between the average CPI-W from the third quarter (of the current year to the third quarter the previous year. If there is an increase in the average CPI-W, that percentage becomes the COLA for the following year.
Here’s a breakdown of the process:
- Data Collection:
The Bureau of Labor Statistics (BLS) provides monthly CPI-W information. The SSA then uses that data from July, August, and September of 2025 to calculate the COLA for 2026. - Calculation Period:
The SSA then takes an average of the CPI-W figures for the third quarter of 2025 and compares it to the average CPI-W for the same period in 2024.
-
- If the CPI-W has increased, beneficiaries get a COLA equal to the percentage increase.
- If the CPI-W has stayed the same or decreased, there is no COLA for that year.
- Announcement Timing:
September’s data is released typically around the second week of October, and this is when the SSA makes the official COLA announcement.
Why Is the 2026 COLA Expected to Be Lower?
The estimated COLA for 2026 is approximately 2.4%, this is the lowest since 2021 and this indeed puts financial pressure on U.S. seniors amid modest inflation increases. This estimate follows April’s 0.2% rise in the consumer-price index. Despite a minor uptick, the forecast trails the 2025 COLA of 2.5% and a 20-year average of 2.6%.
There are several factors that contribute to this:
- The inflation is becoming more stable: In the previous years, inflation rates was much higher, however recent data shows a stabilizing trend which leads to small COLA increases.
- Changes to the economy: Changes in consumer spending and prices of goods and services affect the CPI-W and, consequently, the COLA.
- Changes to policy and legislation: There are many changes to policy and legislation which impact the overall inflation and COLA calculations.
What Does This Mean for Retirees?
For an average retiree receiving approximately $1,976 per month in 2025, a 2.4% COLA would translate to an increase of about $47, bringing the monthly benefit to around $2,023. Even though any minor increase may seem beneficial, many retirees are concerned that these adjustments may not keep up with the increase in living expenses especially for essentials such as medical care, housing and groceries.
There is a significant percentage of the elderly population that rely typically on Social Security. Approximately 73% depend on it for at least half of their income and 39% rely on it as their primary income source.
Given these statistics, even modest COLA increases are important for maintaining the purchasing power and financial stability of retirees.
Final Thoughts
While Social Security payments are set to increase in 2026, the projected COLA suggests a smaller adjustment compared to recent years. Retirees must prepare for slight increases and keep updated with policy changes that could potentially impact their financial stability. Should they require any information, it is wise to consult with financial advisors who will provide necessary assistance.