The monthly Social Security benefit income exists as a lifeline of support for many households across the country. Some of these households may even be solely dependent on their monthly benefit income to get by. Social Security benefit income is, however, a fixed income, so what happens to these households when the effects of inflation creep in?
This is where the annual Cost of Living Adjustment, or COLA, comes into play. The COLA is an annual increase to Social Security benefit amounts that is meant to help the benefit check retain its buying power in the face of inflation. The COLA is determined using third quarter inflation data from the Bureau of Labor Statistics which is measured year over year.
As the third quarter of the current year continues to progress and CPI data solidifies, the 2026 COLA predictions that are available could be considered close to accurate since July data forms a part of these estimates. Here is everything you need to know.
Social Security COLA update
For 2025, all Social Security benefits were given a Cost of Living Adjustment of 2.5% in January. Subsequently, early predictions for the 2026 COLA from the first half of the year matched this figure. However, following the release of July data from the Bureau of Labor Statistics, The Senior Citizens League — a nonpartisan senior advocacy group — updated their estimations for the upcoming COLA to 2.7%.
The specific measure of costs used to determine the annual COLA is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) which has over two hundred different pricing categories. The CPI-W is released on a monthly basis by the Bureau of Labor Statistics. For the COLA calculation, the CPI-W for July, August, and September of the current year is measured against the third quarter CPI-W of the previous year. If there is a year over year increase, that percentage figure becomes the COLA for the upcoming year.
It is also worth noting that if there is no increase, as well as if there is a decrease in the CPI-W from the previous year to the current year, the COLA is announced at 0.0%. This means that your benefit amounts will never be reduced if inflation decreases. Since 1975, there have only been three years where the COLA came in at 0.0%. This occurred in 2010, 2011, and 2016.
Does the COLA sufficiently account for growing costs held by seniors?
As lovely as a higher COLA may sound, it is much more of a nuanced situation that does not necessarily mean good news for seniors. A 2.7% bump to your benefit check is great at a surface level, however, the increase will be coming at the price of rising costs. Simply put, a higher COLA translates directly to higher costs. Not to mention the fact that many seniors already feel that the CPI-W is not an accurate measure of costs relative to the expenses held by the average senior citizen.
A recent study conducted by The Senior Citizens League revealed that almost all participants felt that inflation grows much faster than their benefits do. Transport, housing and medical care are likely the main expenses for seniors, and according to the latest CPI data, all three of these categories have increased. Unfortunately, the data used to determine the annual COLA does not seem to align well enough with the actual costs held by senior and as a result, the modest increase often falls short in fulfilling its purpose.
According to The Senior Citizens League study, 68% of participants were in favor of “calculating the COLA with an inflation index that better represents seniors’ economic experiences. The government currently calculates the COLA with the Consumer Price Index for Urban Wage Earners, but TSCL advocates switching to the Consumer Price Index for the Elderly.”