How the Social Security COLA is calculated

Every October the Social Security Administration announces a number that moves the income of more than 70 million people. The number is not negotiated, voted on or chosen. It falls out of a formula that has been in the Social Security Act since 1973, applied to three months of price data from the Bureau of Labor Statistics. Once you know the formula, you can see the answer taking shape months before the announcement.

The formula in one sentence

The cost-of-living adjustment is the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers, the CPI-W, from the third quarter of the last year that had a COLA to the third quarter of the current year, rounded to the nearest tenth of a percent. That is how SSA's Office of the Chief Actuary states it on its latest COLA page, and it is what section 215(i) of the Social Security Act requires.

Three details in that sentence do the work. The index is the CPI-W, not the more familiar CPI-U that leads the news each month; the two usually move together but they are not identical. The comparison uses an average of July, August and September, so a single hot or cold month is diluted. And if the average has not risen, there is no COLA at all, which is what happened for 2016.

The 2026 COLA, worked through

SSA shows its arithmetic, so the 2.8 percent for 2026 can be checked line by line. The CPI-W figures it used, with 1982 to 1984 equal to 100:

• July: 308.501 in 2024, 316.349 in 2025
• August: 308.640 in 2024, 317.306 in 2025
• September: 309.046 in 2024, 318.139 in 2025

The third-quarter average for 2024 is 308.729 and for 2025 it is 317.265. The increase is 8.536 index points, which is 2.766 percent of the base. Rounded to the nearest tenth, that is 2.8 percent, and that is the COLA that took effect with December 2025 benefits, paid in January 2026.

Why the base year is not always last year

The formula compares against the last year in which a COLA "became effective", not simply the previous year. In most years that is the same thing. It is not when a year produces no increase. There was no COLA effective for December 2015, so when the December 2016 increase was calculated, the base was the third quarter of 2014, two years back, and the result was 0.3 percent. The rule protects beneficiaries from losing ground in a year when prices dip and then recover.

When the announcement comes

The September CPI is the last of the three months, so nothing is final until BLS publishes it. The BLS release calendar puts the September 2026 index on Wednesday, October 14, 2026 at 8:30 a.m. Eastern. SSA's announcement follows the CPI release. In 2025 the September index itself was late, published on October 24 after a lapse in federal funding, and the COLA announcement waited for it.

The August index arrives earlier, on September 11, 2026, and by then two of the three months are known. That is why estimates in the press narrow in September, and why they can still be wrong by a tenth.

Where the 2027 figure stands

The base is fixed: the third-quarter 2025 average of 317.265, because 2025 produced a COLA. Of the three months that will be measured against it, one is published. The July 2026 CPI-W, released by BLS on August 12, 2026, stands at 327.104, which is 3.4 percent above July 2025 and 3.1 percent above the base average. That does not decide anything on its own. The August and September indexes carry equal weight, and the COLA is the change in the three-month average, rounded. The COLA tracker will show the figure the morning it is announced, alongside every COLA since 2015.

What else moves with the announcement

The percentage applies to Social Security benefits and to the federal SSI payment levels alike. Because SSI is normally paid on the 1st and January 1 is a holiday, the first SSI payment at the new rate arrives at the end of December; for 2026 that was December 31, 2025. Social Security's own increase shows up in the January payment, on the usual Wednesday schedule.

SSA publishes several other figures for the year on the same day. For 2026 the maximum earnings subject to Social Security tax rose to $184,500, the earnings limit for people under full retirement age to $24,480, and the limit for the year a person reaches full retirement age to $65,160. Those are set by a different index, average wages, and they appear on SSA's COLA information page because they take effect at the same time.

Two things to keep in mind when the new amount lands. The Medicare Part B premium, which is deducted from most payments, changes in January as well, so the net increase can be smaller than the headline percentage. And the individual notice with your own new amount is posted to the Message Center of your my Social Security account in late November, before the mailed letter.

Where the numbers come from

The COLA and the monthly CPI-W figures behind it are published by SSA's Office of the Chief Actuary, which also keeps the full series of adjustments since 1975. The underlying index is produced by the Bureau of Labor Statistics and released on a schedule fixed a year in advance. Every figure on this page is taken from those documents, and the links go to the documents themselves.