If you have been in a grocery or convenience store recently, you've likely noticed how expensive a lot of items are compared to previous years. Whether it's eggs, chicken, or chips, the increase is noticeable. This is a problem for many people, but especially Social Security recipients, who may rely entirely or mostly on benefits to survive and are on a fixed income.
To help deal with inflation, Social Security applies a cost-of-living adjustment (COLA) that's intended to help retirees keep more of their purchasing power. It's one of the most, if not the most, crucial parts of the Social Security program.
The reason to mark Oct. 15 on your calendar is that it's when Social Security releases its official annual COLA number.
Image source: Getty Images.
How Social Security determines the annual COLA
Social Security considers the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to determine the percentage to set the COLA each year. The CPI-W is a measure of inflation published monthly by the Bureau of Labor Statistics (BLS). It looks at the prices of common expenses, such as housing, food, transportation, medical care, and clothing.
Below are the steps that Social Security takes to calculate the COLA:
- Average the CPI-W data for the third quarter (July, August, and September) of the current year.
- Compare the current year's third-quarter average to the third-quarter average of the previous year.
- Set the upcoming year's COLA at the percentage increase between the two averages.
For example, if the CPI-W average is 300 in the previous year and increases to 315 in the current year, the upcoming year's COLA would be 5%.
If the CPI-W decreased or remained the same, there is no COLA; benefits remain the same. This isn't common, but it has happened before in 2010, 2011, and 2016.
Should Social Security use a different method to determine the COLA?
Social Security has always used CPI-W data to determine the COLA, but many feel as though it isn't the best measure. According to research from The Senior Citizens League (TSCL) -- a nonpartisan senior advocacy group -- Social Security recipients have lost around 30% of their purchasing power since 2000, meaning every $100 in benefits is only worth around $70 in today's dollars.
A major issue has been rising healthcare costs (one of retirees' biggest expenses) in areas not reflected in CPI-W data. Prescription drugs and long-term care are key examples of this. A proposed change has been to use CPI for the Elderly (CPI-E) instead. It applies to people age 62 and older and places greater emphasis on healthcare and housing costs.
The Congressional Research Service (CRS) institution did a study that showed that a COLA based on the CPI-E would've been the same or higher than the actual COLA in all but six years since 1986. It might not have perfectly accounted for inflation over the years, but Social Security likely wouldn't have lost 30% of its purchasing power over the past 25 years.
What COLA should retirees expect in 2026?
Although the official COLA isn't released until Oct. 15, organizations put out estimates based on inflation trends. TSCL is one of them. In its latest estimates, it has the 2026 COLA at 2.6%.
Although any increase is better than no increase, the 2.6% estimated increase is only 0.1% higher than 2025's COLA and below Social Security's 3.4% average COLA since it became a thing in 1975.
Below are the past 10 Social Security COLAs:
| Year | COLA Percentage |
|---|---|
| 2025 | 2.5% |
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
| 2019 | 2.8% |
| 2018 | 2% |
| 2017 | 0.3% |
| 2016 | 0% |
Data source: SSA.
Again, the TSCL estimate is just that: an estimate. Don't take it as gospel. Instead, mark your calendar for Oct. 15, so you can tune into the official announcement and begin planning your 2026 finances accordingly.
