Social Security’s cost-of-living adjustment (COLA) plays a crucial role in maintaining the economic stability of millions of retirees, people with disabilities, and survivors in the U.S.
Each year, this adjustment helps beneficiaries keep up with inflation by increasing their monthly benefits, allowing them to maintain their purchasing power despite rising prices.
The Social Security Administration (SSA) is responsible for calculating and determining this annual COLA. The process involves analyzing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a key economic indicator that tracks changes in the cost of goods and services in the economy.
Let’s break down who qualifies for COLA benefits, when these changes are announced, and how the SSA calculates this essential adjustment.
Who is Eligible for COLA Benefits?
The following groups of people can benefit from COLA adjustments:
Retired Workers: Individuals who have reached retirement age and are receiving monthly Social Security benefits.
Disabled Workers: Those who qualify for Social Security Disability Insurance (SSDI).
Survivors of Deceased Workers: Spouses, children, or other family members who are receiving survivor benefits.
Supplemental Security Income (SSI) Recipients: Individuals who receive SSI, a program designed to assist those with limited income and resources.
What Happens on October 15 for Social Security Beneficiaries?
On October 15, 2025, the Social Security Administration will announce the COLA for 2026. This announcement is eagerly anticipated each year as it directly impacts the benefits of millions of Social Security recipients.
The exact increase will depend on the CPI-W data, which reflects changes in the cost of living for urban wage earners and clerical workers.
How Is Social Security COLA Calculated?
The calculation of COLA is based on a comparison of the Consumer Price Index (CPI-W) for the third quarter of the current year (July, August, and September) with the same period from the previous year. Here’s how it works:
- Average CPI-W Data: The SSA averages the CPI-W data for the third quarter (July, August, and September) of the current year.
- Comparison: This average is then compared to the average CPI-W data for the third quarter of the previous year.
- COLA Determination: The SSA sets next year’s COLA as the percentage increase between these two averages. The higher the increase in the cost of goods and services, the larger the COLA for beneficiaries.
Why Is COLA Important?
For millions of Americans relying on Social Security benefits, COLA is vital in helping them manage the rising cost of living. Without it, the purchasing power of their monthly benefits would erode, making it harder to afford necessities like food, healthcare, and housing.
COLA ensures that Social Security recipients’ financial stability is preserved, even as inflation continues to affect the economy.
Looking Ahead to 2026
The upcoming COLA adjustment, to be announced on October 15, 2025, will directly impact Social Security recipients starting in 2026. Beneficiaries should prepare for this important update, which will be reflected in their payments in early 2026.
By keeping track of the COLA process and understanding how it’s calculated, beneficiaries can better anticipate how their benefits will change and plan accordingly for their financial needs in the coming years.
