Social Security’s cost-of-living adjustment is calculated by comparing the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July, August, and September of the current year to the same three-month average from the most recent year a COLA took effect. The percentage change between those two averages, rounded to the nearest tenth of a percent, becomes the COLA. That formula produced a 2.8 percent increase for 2026, raising payments for roughly 71 million beneficiaries starting in January.1Social Security Administration. Cost-of-Living Adjustment (COLA) Information The whole process runs automatically. No vote in Congress, no signature from the president.
The Index Behind the Number
The CPI-W is a monthly price index published by the Bureau of Labor Statistics. It tracks what a basket of goods and services costs households where at least half the income comes from wage or clerical jobs, covering food, energy, housing, medical care, transportation, and more.2Social Security Administration. CPI for Urban Wage Earners and Clerical Workers Social Security uses the CPI-W rather than the broader CPI-U because it reflects the spending of the working population whose payroll taxes fund the program.
Congress built the automatic COLA into law with the 1972 Social Security Amendments, ending the earlier practice of passing a new statute every time benefits needed to catch up with prices.3Social Security Administration. 1972 Social Security Amendments Starting with the 1975 adjustment, the CPI-W has served as the yardstick, and the mechanics have not changed since.4Social Security Administration. Cost-Of-Living Adjustments
Why Only Three Months of Data
The COLA turns on price data from a single quarter: July, August, and September. BLS publishes a CPI-W value for each of those months, SSA averages the three, and that average is compared to the third-quarter average from the most recent year in which a COLA took effect.5Social Security Administration. Latest Cost-of-Living Adjustment Price movements during the other nine months do not directly enter the math.
The window ends in September because the agency needs time to finalize the figures, update its systems, and notify beneficiaries before January payments go out. If no COLA was triggered in the prior year (because prices were flat or fell), the comparison reaches further back to the last year a COLA did take effect.
The Math, Step by Step
Working through the 2026 adjustment shows how the four steps fit together.
Step 1. Average the current year’s third-quarter CPI-W. Add the July, August, and September values and divide by three. For 2025, that average came to 317.265.
Step 2. Identify the comparison average, meaning the third-quarter average from the last year a COLA took effect. Because a COLA was triggered in 2024, the comparison figure was 308.729.
Step 3. Calculate the percentage change. Subtract the older average from the newer one, divide by the older, and multiply by 100. That gives (317.265 − 308.729) ÷ 308.729 × 100 = 2.766 percent.
Step 4. Round to the nearest tenth of a percent. The result is 2.8 percent.5Social Security Administration. Latest Cost-of-Living Adjustment
SSA then applies that rounded percentage to each beneficiary’s payment. Any resulting amount that is not an even multiple of ten cents is rounded down to the next lower dime.6Office of the Law Revision Counsel. 42 USC 415 – Computation of Primary Insurance Amount
Benefits Can Stay Flat, But They Cannot Fall
The statute sets a floor. If the current third-quarter average is lower than or equal to the comparison average, the COLA is zero and your benefit stays the same.6Office of the Law Revision Counsel. 42 USC 415 – Computation of Primary Insurance Amount A monthly check cannot shrink because prices fell. That has happened three times since automatic COLAs began: no increase took effect for the years beginning in 2010, 2011, and 2016.4Social Security Administration. Cost-Of-Living Adjustments
When the New Amount Is Announced and Paid
Once the September CPI-W is final, SSA announces the COLA, typically in mid-October.7Social Security Administration. Cost-Of-Living Adjustment (COLA) The 2.8 percent figure for 2026 was announced on October 24, 2025.8Social Security Administration. Social Security Announces 2.8 Percent Benefit Increase for 2026
Beneficiaries receive a personalized notice showing the exact new dollar amount, either by mail in early December or through the “my Social Security” online portal.8Social Security Administration. Social Security Announces 2.8 Percent Benefit Increase for 2026 The higher payments arrive with January checks. Supplemental Security Income recipients see their increase slightly earlier, generally on the last day of December.1Social Security Administration. Cost-of-Living Adjustment (COLA) Information
What Can Eat Into the Raise
The percentage on the announcement is the gross figure. Two things commonly reduce what actually lands in a beneficiary’s pocket.
Medicare Part B Premiums
Most Social Security beneficiaries enrolled in Medicare have their Part B premium deducted straight from their monthly benefit. For 2026, the standard Part B premium is $202.90, up from $185.00 in 2025.9Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles That $17.90 monthly jump cuts into whatever the 2.8 percent COLA adds.
A federal “hold harmless” rule keeps most beneficiaries from a net loss: your Part B premium increase cannot exceed your COLA dollar increase, so take-home Social Security cannot fall year over year because of a rising Part B premium.10Office of the Law Revision Counsel. 42 USC 1395r – Amount of Premiums for Individuals Enrolled Under Part B The protection applies only when the premium is automatically deducted from the Social Security check. It does not cover people newly enrolling in Medicare, higher-income beneficiaries who pay the income-related surcharge (IRMAA), or those whose premiums are paid by Medicaid.
Federal Income Tax on Benefits
A COLA can also push benefits into a range where they become partially taxable. Taxation is based on “combined income,” meaning adjusted gross income plus any nontaxable interest plus half of your Social Security benefits.
The thresholds have not been adjusted for inflation since they were set in the 1980s and 1990s:11Office of the Law Revision Counsel. 26 USC 86 – Social Security and Tier 1 Railroad Retirement Benefits
- Single filers with combined income between $25,000 and $34,000: up to 50 percent of benefits are taxable. Above $34,000: up to 85 percent.
- Married filing jointly with combined income between $32,000 and $44,000: up to 50 percent of benefits are taxable. Above $44,000: up to 85 percent.
Because those figures are frozen while benefits rise each year, a growing share of beneficiaries crosses into taxable territory over time. If your income sits near a threshold, the COLA can produce a larger tax bill that offsets part of the larger check.