On Aug. 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law during the Great Depression. A few years later, in January 1940, the first monthly Social Security checks were mailed out.
Fast-forward 90 years, and the program has become one of the largest federal programs in the U.S., paying out more than $1.6 trillion annually to 72 million beneficiaries across retirement, disability, and survivor benefits.
Why the COLA Matters Most
Over the decades, Social Security has evolved in terms of eligibility, retirement age, and benefit calculations. But one of the most important annual updates is the cost-of-living adjustment (COLA), which helps retirees keep up with inflation.
The COLA was first introduced in 1972 to ensure retirees on fixed incomes didn’t fall too far behind as prices rose. Each fall, the Social Security Administration (SSA) announces the next year’s COLA, with the official 2026 figure coming on Oct. 15, 2025.
For now, the Senior Citizens League (TSCL) projects the COLA at 2.7%. While not guaranteed, this gives retirees a rough idea of what to expect.
How the COLA Is Calculated
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), published monthly by the Bureau of Labor Statistics. It measures inflation in categories such as:
Food (groceries and restaurants)
Transportation (gas, vehicles, public transit)
Housing (rent and utilities)
Healthcare (services, prescriptions, insurance premiums)
The SSA follows a three-step process:
- Calculate the CPI-W average for July–September (Q3) of the current year.
- Compare it to the Q3 average of the prior year.
- The percentage increase, rounded to the nearest tenth, becomes the new COLA.
If the CPI-W shows no increase (or falls), benefits stay flat. This has happened before, most recently in 2010, 2011, and 2016.
Will a 2.7% Increase Be Enough?
An increase is better than none, but retirees often argue it isn’t enough to match true inflation. According to TSCL:
Since 2000, retirees have lost 30% of their buying power.
From 2010 to 2024, benefits lost 20% of purchasing power.
If the COLA does land at 2.7%, the average monthly benefit would rise from $2,007 (July 2025 average) to $2,061, a gain of about $54 per month. For many retirees, however, rising costs in healthcare, housing, and groceries outpace that increase.
What Retirees Should Keep in Mind
There are no immediate plans to change how COLAs are calculated. For now, retirees should:
Expect only modest yearly adjustments.
Consider supplementing Social Security with savings, pensions, or part-time income.
Watch for annual COLA announcements each October to plan budgets.
As Social Security marks its 90th anniversary, it remains a cornerstone of retirement security in America. But while a projected 2.7% COLA for 2026 may give retirees a little breathing room, it’s unlikely to fully cover rising living expenses.
Beneficiaries should stay proactive with their financial planning, remembering that Social Security is designed to support retirement—not fully fund it.
