How the Social Security COLA is calculated

Every October the Social Security Administration announces the cost-of-living adjustment, or COLA, for the year ahead. Nobody votes on it. The number comes out of a formula in the Social Security Act, fed by consumer prices from the summer.

The price index behind it

The COLA follows CPI-W, the consumer price index for urban wage earners and clerical workers. It tracks prices for households that get most of their income from clerical or hourly work, about 30 percent of the population. The headline inflation number in the news is a different index, CPI-U, which covers all urban consumers.

The two usually land within a few tenths of a point of each other. Compared with what many retirees buy, CPI-W puts more weight on transportation, including gasoline, and less on medical care. The Bureau of Labor Statistics publishes a research index for Americans 62 and older, but the law ties the COLA to CPI-W.

The formula

SSA averages CPI-W for July, August and September, rounding the average to three decimals. It compares that with the same average for the last year that had a COLA. The percentage increase, rounded to the nearest tenth of a percent, is the COLA.

For the 2026 COLA, the July–September 2025 average was 317.265, against 308.729 for the same months of 2024. That is an increase of 2.76 percent, which rounds to 2.8 percent.

If prices fell over the year, or the rounded increase is zero, there is no COLA. Benefits do not go down.

When it shows up

SSA announces the COLA on the morning the September CPI is released, usually in mid-October. The raise applies to benefits for December, which are paid in January. Supplemental Security Income rises by the same percentage; because January 1 is a holiday, the first higher SSI payment arrives on the last business day of December.

SSA raises your primary insurance amount, the benefit before any reduction for claiming early or credit for claiming late, by the COLA and rounds it down to the dime. Your monthly payment is figured from that amount and rounded down to the whole dollar, which is why a raise worked out by hand can be off by a dollar.

What else changes in January

Medicare Part B premiums usually come out of the same check, and they are reset every January. When the premium rises, the net increase in your deposit is smaller than the COLA. A rule known as hold harmless keeps the premium increase from lowering most beneficiaries’ net Social Security payment, though it does not cover people who pay the income-related surcharge or people new to Medicare.