If you're currently receiving Social Security benefits, you'll soon be getting a slightly bigger monthly payment. That's because the program regularly raises its payouts to keep up with rising cost of living -- or inflation -- that its beneficiaries are facing. It's called a cost-of-living adjustment, in fact, or COLA for short.
So what's the upcoming pay bump apt to look like? We can come up with a pretty likely number, even if it's not yet etched in stone. But first, let's look at how this COLA is determined in the first place, and what previous ones have looked like.
Image source: Getty Images.
How does Social Security's annual COLA happen anyway?
Kudos to the U.S. Congress for automating the annual calculation and implementation of cost-of-living adjustments back in 1972.
Before then, any increase was a matter put to a congressional vote, which of course means they didn't always happen. With the passage of certain Social Security amendments in 1972, however, as of 1975 these adjustments reflecting the Bureau of Labor Statistics' official inflation measure became a legal requirement. That measure is of course the consumer price index for U.S. workers, or CPI-W.
And the approach works well enough. Oh, it's sometimes criticized for only boosting retirees' income after they've already felt the sting of higher prices. Some critics also say it doesn't reflect the rising costs that uniquely apply to retired Americans (like healthcare expenses).
For a sprawling program serving nearly 70 million beneficiaries that's managed by a cash-strapped federal government though, these cost-of-living increases are about as fair as they're able to be. The table below lays out Social Security's COLAs going all the way back to 1984.
| Year | COLA | Year | COLA |
|---|---|---|---|
| 1984 | 3.5% | 2005 | 2.7% |
| 1985 | 3.5% | 2006 | 4.1% |
| 1986 | 3.1% | 2007 | 3.3% |
| 1987 | 1.3% | 2008 | 2.3% |
| 1988 | 4.2% | 2009 | 5.8% |
| 1989 | 4% | 2010 | 0% |
| 1990 | 4.7% | 2011 | 0% |
| 1991 | 5.4% | 2012 | 3.6% |
| 1992 | 3.7% | 2013 | 1.7% |
| 1993 | 3% | 2014 | 1.5% |
| 1994 | 2.6% | 2015 | 1.7% |
| 1995 | 2.8% | 2016 | 0% |
| 1996 | 2.6% | 2017 | 0.3% |
| 1997 | 2.9% | 2018 | 2% |
| 1998 | 2.1% | 2019 | 2.8% |
| 1999 | 1.3% | 2020 | 1.6% |
| 2000 | 2.5% | 2021 | 1.3% |
| 2001 | 3.5% | 2022 | 5.9% |
| 2002 | 2.6% | 2023 | 8.7% |
| 2003 | 1.4% | 2024 | 3.2% |
| 2004 | 2.1% | 2025 | 2.5% |
Data source: U.S. Social Security Administration
Note that in years where cost-reducing deflation rather than price-increasing inflation took shape (like 2010, 2011, and 2016), the Social Security Administration doesn't reduce the size of anyone's payments even though it arguably has the right to do so.
When and how much?
So what's the upcoming cost-of-living looking like? For that matter, when will it be announced, and when will it go into effect? We'll hear 2026's COLA figure from the Social Security Administration on Oct. 15, shortly after the Bureau of Labor Statistics releases September's CPI data.
The adjustment isn't based solely on the BLS's inflation report for the current month, though. Rather, it averages the year-over-year change in the consumer price index for the months of July, August, and September, just to ensure the calculation is an accurate, measured reflection of the rising cost of living that people living in the United States are actually facing.
For what it's worth, however, August's year-over-year inflation rate stood at 2.9%, while July's was 2.7%. This more or less aligns with The Senior Citizen's League's (TSCL) most recently prediction that the cost-of-living for the upcoming year will be 2.7%, as well as the average annualized inflation rate of just over 2.6% for the past 12 months.
For perspective, a 2.7% increase of the current average retirement benefit of $1,976 per month would inflate the figure to $2,029.
As for the timing of whatever cost-of-living adjustment Social Security's going to implement when the time comes, the increase technically goes into effect for the month of December, which will be the payments received in January.
Don't worry too much about the COLA number either way
Are you already making your own predictions for 2026's Social Security cost-of-living adjustment, and trying to figure out how it might impact your monthly payment? If so, you're not alone.
If that is you though, you may be worrying a bit too much about the wrong thing. For perspective, the difference between a COLA of 2.7% and a COLA of 3% on the average monthly Social Security payment of $1,976 is only about $6 per month. That's not huge. Switching a $10,000 investment in a dividend stock that's yielding 3% to one that's yielding 4% would provide about the same degree of improvement. Something as simple as optimizing your cash could make a much bigger impact for the better.
It's true! While conventional banks are paying next to nothing on money on checking accounts and only a little more on savings accounts, most online banks and brokerage firms are offering money market accounts that are paying in the ballpark of 4%.
In fact, as crazy as it sounds, the biggest boost to your bottom line in retirement could easily be the costs you cut. Switching auto insurance, setting your thermostat one degree higher or lower, clipping coupons, asking for senior discounts, or cancelling a subscription or two would each make just as much -- if not more -- difference as a realistically better Social Security COLA ever could.
So, keep your eyes and ears open in mid-October. Just don't dwell on the announcement too much between now and then, or afterwards. You'll be far better served using that time just making sure your retirement portfolio holds every stock you should own (and none you shouldn't), and ensuring that you're getting the most bang for every buck you're spending on basic living costs.
