In August, the Social Security program commemorated its 90th anniversary. Since President Franklin D. Roosevelt signed the Social Security Act into law on Aug. 14, 1935, and the first checks were mailed out in Jan. 1940, it has been one of America's staple social programs, keeping hundreds of millions of people financially afloat in retirement.
During that span, Social Security has undergone many changes, but the overall intent of the program remains the same. Some changes have been permanent, such as rising full retirement ages. Other changes, like the cost-of-living adjustment (COLA), are ones you can expect to happen almost annually.
Based on estimates from The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, when the Social Security Administration (SSA) announces the 2026 COLA on Oct. 15, it will likely be higher than 2025's COLA. This otherwise good news comes with a catch that retirees may not like.
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How the SSA determines the annual COLA
The SSA calculates the COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It's a measure of inflation that's published monthly by the Bureau of Labor Statistics and tracks inflation across categories like food, transportation, housing, and healthcare.
First, it calculates the CPI-W average for the third quarter (July, August, and September) of the current year. Then, it compares that number to the average for the same period a year ago. Any percentage increase becomes the COLA for the upcoming year (rounded to the nearest 0.1%).
For example, the CPI-W average in Q3 2024 (308.729) was 2.49% higher than in 2023 (301.236), so the 2025 COLA was set at 2.5%.
If the CPI-W decreases or stays the same, there is no COLA, and benefits remain unchanged. This has only happened three times, in 2010, 2011, and 2016.
What is the predicted COLA?
In The Senior Citizens League's latest estimate released in August, the 2026 COLA is projected to be 2.7%. This would be a slight increase from 2025's COLA but still less than the average COLA since it became an annual occurrence in 1975.
Here are the past 10 COLAs:
| Year | Percentage |
|---|---|
| 2025 | 2.5% |
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
| 2019 | 2.8% |
| 2018 | 2.0% |
| 2017 | 0.3% |
| 2016 | 0.0% |
Data source: SSA.
TSLC comes up with its COLA estimates using CPI data, the Federal Reserve interest rate, and the national unemployment rate. That said, I want to emphasize that the estimated COLA is still an estimate at the end of the day. The true figure won't be known until the SSA releases it on Oct. 15.
However, if we assume the 2.7% estimate is correct, some collecting the current average monthly benefit would see it increase from $2,007 to $2,061.
So, what's the catch with the estimated 2026 COLA?
The (unfortunate) catch is that many recipients will likely feel the higher 2026 COLA still doesn't effectively offset the inflation they're witnessing. Given research from TSCL, which says that Social Security recipients have lost around 20% of their purchasing power since 2010, this sentiment seems spot on.
That said, what is the solution to this problem? There's no clear-cut answer to this, but one recommendation has been to switch up the metric used to determine the annual COLA. A proposed option is using the R-CPI-E, a metric that specifically focuses on the spending habits of people 62 and older.
According to the Congressional Research Service, using the R-CPI-E instead of CPI-W would've resulted in a higher COLA in 33 of the last 39 years (the exceptions are 2005, 2008, 2011, 2018, 2021, and 2022).
There's no telling if the SSA will ever adopt the R-CPI-E, or any other metric, to calculate the COLA so retirees should plan accordingly and treat COLAs as a modest buffer, not a complete safeguard against inflation.
