The Social Security program changes every year, and one of the most anticipated announcements is the Cost of Living Adjustment (COLA). This adjustment determines if beneficiaries receive an increment in their monthly payments to help them deal with the higher prices.
In 2026, Social Security will have a 2.8% increment in monthly benefits from January. This change is a bit higher than the one in 2025, which was 2.5%. Even though it sounds like great news, it also has a negative side. So, let’s explain in simple words what this means and how it can affect you.
The Social Security COLA
It’s a change that the Social Security Administration (SSA) makes every year to make sure that people receiving benefits do not lose too much purchasing power because of inflation. And what’s inflation? This is when prices of basic products like food, clothes, housing, and medic care rise with the passage of time. Basically, if Social Security payments never changed, people could buy less with their money every year and this is why COLA exists: to help avoid this situation.
Normally, the new COLA is announced about October 15, but in 2025 the announcement was delayed to October 24 due to the government’s shutdown.
How COLA is calculated
The Social Security Administration uses a formula to calculate the COLA. They look at something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures how much prices have changed for a basket of goods and services — things like food, transportation, rent, and medical care. It’s updated every month by the Bureau of Labor Statistics (BLS). The process to calculate the COLA has 3 steps:
- They take the average CPI-W from July, August, and September (the third quarter of the year).
- They compare that average to the same period from the previous year.
- The percentage difference between those two numbers becomes the new COLA.
For example, the CPI-W average in 2024 was 308.729, and in 2025 it was 317.265. That difference (2.76%) is rounded to 2.8%, which is the COLA for 2026.
In case prices do not rise, there won’t be COLA that year, but the payments are never reduced. This happened before in 2010, 2011, and 2016.
History of COLA (1979-2026)
Throughout the years, COLA has changed a lot. In the 80s, when inflation was very high, the increments were high too: 14.3% in 1981, and 11.2% in 2025. Then in the last couple of years, the increments have been way lower: 1.3% in 2021, 5.9% in 2022, 8.7% in 2023, 3.2% in 2024, and 2.5% in 2025.
The 2026 change of 2.8% in 2026 is a bit higher than the one in 2025, but it’s still lower than the historic average of 3.7% since 1975 (when adjustments became automated). Now, let’s see in more detail all the adjustments from 1979 to 2026:
| Year | COLA | Year | COLA | Year | COLA | Year | COLA |
| 1979 | 6.5% | 1991 | 5.4% | 2003 | 1.4% | 2015 | 1.7% |
| 1980 | 9.9% | 1992 | 3.7% | 2004 | 2.1% | 2016 | 0.0% |
| 1981 | 14.3% | 1993 | 3.0% | 2005 | 2.7% | 2017 | 0.3% |
| 1982 | 11.2% | 1994 | 2.6% | 2006 | 4.1% | 2018 | 2.0% |
| 1983 | 7.4% | 1995 | 2.8% | 2007 | 3.3% | 2019 | 2.8% |
| 1984 | 3.5% | 1996 | 2.6% | 2008 | 2.3% | 2020 | 1.6% |
| 1985 | 3.5% | 1997 | 2.9% | 2009 | 5.8% | 2021 | 1.3% |
| 1986 | 3.1% | 1998 | 2.1% | 2010 | 0.0% | 2022 | 5.9% |
| 1987 | 1.3% | 1999 | 1.3% | 2011 | 0.0% | 2023 | 8.7% |
| 1988 | 4.2% | 2000 | 2.5% | 2012 | 3.6% | 2024 | 3.2% |
| 1989 | 4.0% | 2001 | 3.5% | 2013 | 1.7% | 2025 | 2.5% |
| 1990 | 4.7% | 2002 | 2.6% | 2014 | 1.5% | 2026 | 2.8% |
Why the 2026 COLA is good and bad
The great news is that beneficiaries will receive more money. I mean, any increment, even if it’s small, helps people¡le who depend on Social Security. However, the bad news is that this change is not always enough. According to the Senior Citizens League organization, the purchasing power of Social Security beneficiaries has lowered 20% since 2010.This means that with $100 in 2010, you could only buy today what before costed $80.
COLA and retirees
The thing is that the CPI-W is based on workers’ consuming habits, not retirees’. The latter tend to spend more on medic care and less on transport or clothes; so their real inflation is different.
Some experts propose using a different index called Consumer Price Index for the Elderly (CPI-E) to properly represent the real expense of retirees. Do you think this proposal is a good idea?