Adjustment

Today was supposed to be a banner day for Social Security’s more than 70 million traditional beneficiaries.

Between the 10th and 15th of every month, the U.S. Bureau of Labor Statistics (BLS) releases the previous month’s inflation data. This information is used by the Social Security Administration (SSA) to calculate the annual cost-of-living adjustment (COLA).

The BLS was slated to release the September inflation report — the final piece of data needed to unveil the 2026 COLA — at 08:30 a.m. ET on Oct. 15. But due to the federal government shutdown, the most-anticipated announcement of the year has been pushed back.

While there are some things we can speculate about with regard to the 2026 COLA, there’s one Social Security change in the upcoming year that’s a concrete certainty.

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Social Security’s 2026 COLA reveal will occur on Oct. 24

In its simplest form, Social Security’s COLA is the near-annual “raise” passed along to beneficiaries to offset the impact of inflation (rising prices). If benefits weren’t adjusted for the effects of inflation, Social Security recipients would see their income lose buying power most years.

For the last half-century, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has served as Social Security’s inflation measuring stick. With more than 200 different spending categories, each with its own unique percentage weightings, the CPI-W can be reported as a single figure by the BLS each month.

The quirk with Social Security’s COLA calculation is that only the months of July, August, and September (the third quarter) matter. The other nine months of the year can be helpful in spotting trends, but they aren’t used in the COLA calculation.

With CPI-W readings from July and August already known, the only puzzle piece missing is September. Unfortunately, most economic data reports from federal agencies are delayed indefinitely during government shutdowns.

However, some BLS staffers are going back to work and will be releasing the September inflation report on Friday, Oct. 24, at 08:30 a.m. ET, according to information provided to CNBC. The SSA will announce the 2026 COLA on Oct. 24, as well.

If you don’t want to wait for the SSA to release its annual Fact Sheet, you, the reader, will have the ability to easily calculate Social Security’s 2026 cost-of-living adjustment on your own once the September CPI-W is known. I walked through the steps of this straightforward COLA calculation earlier this week, which ensures you won’t have to wait for the SSA to make its announcement.

Based on estimates from nonpartisan senior advocacy group The Senior Citizens League and independent Social Security and Medicare policy analyst Mary Johnson, next year’s COLA is forecast to come in at 2.7% or 2.8%, respectively. This would work out to an extra $54 to $56 per month for the typical retired-worker beneficiary, and $43 to $44 extra each month for the average worker with disabilities and survivor beneficiary.

While little is set in stone — other than the expectation of the BLS reporting the last piece of data needed to calculate the 2026 COLA on Oct. 24 — retirees are very likely getting the short end of the stick with next year’s raise. COLAs have consistently come up short for retirees, and a projected 11.5% increase in the 2026 Medicare Part B premium isn’t going to help.

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No speculating here! This is the one guaranteed Social Security change for 2026

Though the government shutdown has delayed the release of key pieces of information, such as next year’s COLA, the maximum taxable earnings cap, the maximum monthly payout at full retirement age, and the withholding thresholds tied to the retirement earnings test, there is one Social Security change that’s guaranteed to take place in 2026. However, you’ll have to go to the state level to see it.

Firstly, yes, Social Security benefits may be taxable at the federal and state levels.

Individuals whose provisional income — adjusted gross income (AGI) + tax-free interest + one-half benefits — tops $25,000, or $32,000 for couples filing jointly, can have some of their Social Security income exposed to federal taxation.

Meanwhile, nine states currently tax Social Security income to some degree. Listed in alphabetical order, these states are:

1. Colorado
2. Connecticut
3. Minnesota
4. Montana
5. New Mexico
6. Rhode Island
7. Utah
8. Vermont
9. West Virginia

When the calendar flips to Jan. 1, 2026, West Virginia will officially become one of 42 states that don’t tax Social Security income.

In the 2022 tax year, West Virginia made Social Security income exempt from state-level taxation for individuals and jointly filing couples with respective AGIs of $50,000 or less and $100,000 or less.

In March 2024, West Virginia’s legislature passed, and its governor signed, a new law that phases out the taxation of Social Security benefits over a three-year period for those folks who didn’t qualify for this previous AGI adjustment.

Beginning in the 2024 tax year, West Virginians who received Social Security benefits and generated more than $50,000 in AGI (or $100,000 in AGI, if filing jointly) saw 35% of their Social Security benefits exempted from state-level taxation. In 2025, this exemption increased to 65% of Social Security income. In 2026, 100% of Social Security income will be exempted at the state level.

West Virginia will join Kansas, Missouri, Nebraska, and North Dakota as states that have shelved the taxation of Social Security benefits since this decade began.

While this has been anything but a normal COLA announcement month for Social Security, the one thing we do know is that Social Security recipients in West Virginia will be all smiles when the new year arrives.

For most retirees, Social Security is more than just a monthly deposit into their bank accounts. It represents a financial lifeline that helps them make ends meet.

In 2023, Social Security lifted more than 22 million people out of poverty, according to an analysis from the Center on Budget and Policy Priorities (CBPP), and 16.3 million of these recipients were aged 65 and over. If Social Security didn’t exist, the CBPP estimates the poverty rate for adults aged 65 and up would jump nearly fourfold, from 10.1% (with existing payouts) to 37.3%.

Meanwhile, 24 years of annual surveys from Gallup show that 80% to 90% of aged beneficiaries lean on their payouts in some capacity to cover their expenses.

For retirees, few announcements have more bearing than the annual cost-of-living adjustment (COLA) reveal in October. Though Social Security payouts are on track to do something that hasn’t been witnessed in almost 30 years, next year’s “raise” appears set to give retirees the short end of the stick, yet again!

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What is Social Security’s COLA and why might the 2026 reveal be delayed?

The fabled “COLA” you’ve probably been hearing and reading about over the last couple of weeks is the tool the Social Security Administration (SSA) has on its proverbial toolbelt to keep benefits aligned with inflation.

Hypothetically, if a large basket of goods and services that retirees regularly purchase increases in cost by 2% from one year to the next, Social Security benefits would also need to climb by 2%. Otherwise, these folks would see their buying power decline. Social Security’s COLA attempts to mirror the inflationary pressures that program recipients are facing so they don’t lose purchasing power.

This near-annual raise is based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which has measured price changes for Social Security since 1975. It has more than 200 individually weighted categories, which allows the CPI-W to be chiseled down to a single figure at the end of each month. These readings can be compared to the prior-year period to determine if prices are collectively rising (inflation) or declining (deflation).

What makes the COLA calculation unique is that only CPI-W readings from July, August, and September (the third quarter) are used to determine the upcoming year’s raise. If the average third-quarter CPI-W reading in the current year is higher than the comparable period last year, prices, as a whole, have risen, and so will Social Security checks in the upcoming year.

The catch with Social Security’s 2026 COLA is that its expected reveal on Oct. 15 may be delayed. The September inflation report is the final puzzle piece needed to calculate the program’s cost-of-living adjustment. However, most economic data releases are delayed during a federal government shutdown, which, in turn, can postpone the Oct. 15 COLA announcement set for 8:30 a.m. ET.

A higher prevailing rate of inflation in recent years has led to beefier annual COLAs. U.S. Inflation Rate data by YCharts.

A first-of-its-century raise is eventually headed retirees’ way

Once the SSA does have the necessary data to calculate and reveal the 2026 COLA, it’s a virtual certainty that beneficiaries will witness history being made.

Over the last four years, Social Security recipients — retired workers, workers with disabilities, and survivor beneficiaries — have enjoyed above-average cost-of-living adjustments. From 2022 through 2025, their Social Security checks grew by 5.9%, 8.7%, 3.2%, and 2.5%, respectively. To put these figures into some sort of context, the average COLA increase over the last 16 years was 2.3%.

Based on two independent estimates that were updated following the release of the August inflation report, a fifth-consecutive year above this 16-year average is expected.

Nonpartisan senior advocacy association The Senior Citizens League (TSCL) has pegged their 2026 COLA forecast at 2.7%, while independent Social Security and Medicare policy analyst Mary Johnson is calling for a slightly higher boost of 2.8%. These two forecasts would imply a roughly $54 to $56 per-month increase in the average retired-worker benefit in the new year.

More importantly, a 2.7% or 2.8% COLA would result in an event that hasn’t been witnessed in almost three decades. From 1988 through 1997, Social Security COLAs vacillated between 2.6% and 5.4%. If the 2026 COLA comes in at 2.5% or above, which looks like a virtual certainty based on independent estimates, it would mark the first time in 29 years that benefits will have risen by at least 2.5% for five consecutive years.

Image source: Getty Images.

The purchasing power of a Social Security dollar isn’t what it used to be

Unfortunately, this potentially history-making moment won’t be fully felt or enjoyed by aged beneficiaries. Though nominal payouts have notably climbed in recent years, the painful reality is that the buying power of Social Security income simply isn’t what it once was.

For example, you might be surprised to learn that the CPI-W isn’t doing retirees any favors. While this index is designed to mirror the inflationary pressures that Social Security’s retired workers are contending with, it has built-in flaws that keep this from happening.

The CPI-W is an index that tracks the cost pressures faced by “urban wage earners and clerical workers,” who, in many cases, are workers under the age of 62. By comparison, 87% of Social Security beneficiaries are 62 and above, as of December 2024.

Aged beneficiaries spend their money differently than workers under the age of 62. Specifically, retirees spend a higher percentage of their budget on medical care services and shelter than younger folks. Even though seniors make up 87% of all Social Security recipients, the CPI-W doesn’t account for the added importance of shelter and medical-care service costs in the COLA calculation.

Furthermore, the trailing-12-month inflation rate for shelter and medical care services has pretty consistently been higher than the annual COLAs beneficiaries have received. According to TSCL, this disparity has played a role in reducing the buying power of Social Security income by 20% from 2010 to 2024. A 2.7% or 2.8% cost-of-living adjustment isn’t going to offset or halt this decline in purchasing power.

To make matters worse, dual enrollees — those receiving Social Security income who are also enrolled in traditional Medicare — are expected to see sizable COLA offsets due to a projected double-digit percentage increase in the Part B premium in 2026.

Part B is the portion of Medicare responsible for outpatient services, and the premium for Part B is commonly deducted from a Social Security recipient’s monthly benefit. An estimate from the 2025 Medicare Trustees Report calls for an 11.5% jump in the Part B premium to $206.20 next year. For lifetime low earners, this increase might gobble up every cent of their projected 2026 COLA.

Regardless of whether or not Social Security’s 2026 COLA is delayed, it’ll mark another year where retirees get the short end of the stick.

The big day for Social Security’s more than 70 million traditional beneficiaries is right around the corner. Assuming the government shutdown doesn’t delay a key data release, on Oct. 15, the Social Security Administration will unveil a multitude of changes for the upcoming year, with the highlight being the 2026 cost-of-living adjustment (COLA).

For retired-worker beneficiaries, who accounted for more than 76% of all traditional Social Security recipients in August, the income they receive from this all-important program is often vital to their financial well-being. Almost a quarter-century of annual surveys from Gallup shows that 80% to 90% of retirees lean on their monthly Social Security check to cover some aspect of their expenses.

Though retired-worker beneficiaries are less than two weeks away from knowing precisely how much they’ll receive each month in 2026, the dreaded lose-lose scenario looks to be very much on the table.

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Social Security’s cost-of-living adjustment plays an important role for beneficiaries

Before digging into the nitty-gritty of what’s to come for program recipients, it’s imperative to understand why Social Security’s COLA exists.

The best way to view Social Security’s cost-of-living adjustment is as a near-annual “raise” that accounts for the effects of inflation that beneficiaries are contending with. Hypothetically, if a large basket of goods and services regularly purchased by Social Security beneficiaries increased in cost by 3% from one year to the next, Social Security payouts would also need to climb by the same percentage to avoid a loss of buying power. Social Security’s COLA is the raise that attempts to mirror the effects of rising prices (inflation).

Prior to 1975, there was no formula for calculating COLAs on an annual basis. From the very first payout in January 1940 through the end of 1974, only 11 cost-of-living adjustments were enacted by special sessions of Congress.

The near-annual COLAs we’re used to today began in 1975, which is when the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was adopted as Social Security’s inflationary measure. The CPI-W is reported as a single figure on a monthly basis, which allows for quick year-over-year comparisons to determine if prices are, collectively, rising (inflation) or declining (deflation).

The quirk with Social Security’s COLA is that only three months of readings factor into the calculation: July, August, and September (i.e., the third quarter). If the average third-quarter CPI-W reading in the current year is higher than the comparable period of the previous year, inflation has taken place and beneficiaries are set for a higher payout. Payouts can stay the same year to year; they are not decreased, even if prices in the measured period drop.

A historic expansion of U.S. money supply sent the prevailing inflation rate and Social Security COLAs soaring. US Inflation Rate data by YCharts.

Independent Social Security COLA estimates for 2026 have been narrowed

Based on independent estimates, retired workers, workers with disabilities, and survivors of deceased workers are all in line for a boost to their monthly benefit in the new year.

Following a decade of anemic cost-of-living adjustments during the 2010s, the last four years have featured above-average COLAs. A historic expansion of U.S. money supply during the earlier days of the COVID-19 pandemic led to the highest prevailing rate of inflation in the U.S. in four decades. The result was a 5.9% COLA in 2022, followed by 8.7% in 2023, 3.2% in 2024, and 2.5% in 2025. To add some context to these payout increases, the average COLA over the previous 16 years is 2.3%.

The encouraging news (at least on paper) for Social Security recipients is that the 2026 COLA is on track to do something that hasn’t been witnessed in 29 years. For the first time since 1988 through 1997, the program’s raise is forecast to reach at least 2.5% for a fifth consecutive year. On a nominal-dollar basis, Social Security beneficiaries have seen their payouts notably increase over the last half-decade.

According to nonpartisan senior advocacy group The Senior Citizens League (TSCL), next year’s COLA is projected to come in at 2.7%. Independent Social Security and Medicare policy analyst Mary Johnson, who retired from TSCL early last year, foresees a slightly more robust payout boost of 2.8% in 2026.

If the assumption is made that one of these two forecasts proves accurate, the average monthly benefit for retired workers would climb by approximately $54 to $56 in 2026. Meanwhile, the average worker with disabilities and average survivor beneficiary would both see their monthly Social Security income rise by $43 to $44, respectively.

Image source: Getty Images.

The dreaded lose-lose scenario is looking likely for most retirees in 2026

But even though independent estimates point to a fifth straight year where Social Security’s raise will top its 16-year average, aged beneficiaries are almost certain to discover the 2026 COLA comes up short in two ways.

The first issue relates to the inherent shortcomings of the CPI-W. While near-annual COLAs are a vast improvement compared to Congress passing along raises without rhyme or reason, the CPI-W is itself far from perfect.

As its full name makes clear, the CPI-W tracks the costs “urban wage earners and clerical workers” are facing. These are typically working-age Americans not currently receiving a Social Security benefit. More importantly, urban wage earners and clerical workers spend their money differently than seniors — and adults aged 62 and over make up 87% of Social Security’s traditional beneficiaries.

Older, retired Americans spend a larger percentage of their monthly budget on shelter and medical care services than working-age folks. Not only does the CPI-W not adequately account for the higher weighting retirees place on these two spending categories, but the trailing-12-month inflation rate for shelter and medical care services has been consistently higher than the COLA passed along to program recipients.

Based on two separate studies by TSCL, the purchasing power of a Social Security dollar dropped by 36% from 2000 to 2023, and by 20% between 2010 and 2024. This loss of buying power is likely to continue in 2026.

Retirees who are dually enrolled in Social Security and traditional Medicare are also set to lose in the upcoming year.

People who are enrolled in traditional Medicare and Social Security almost always have their Medicare Part B premium automatically deducted from their monthly Social Security payout. Part B is the portion of Medicare responsible for outpatient services.

In 2023 and 2024, the Part B premium rose by 5.9% each year. But based on estimates from the June-published Medicare Trustees Report, the Part B premium is forecast to climb 11.5% to $206.20 per month in the upcoming year. There’s little doubt that this is going to partially or fully offset the impact of next year’s Social Security COLA for most dual enrollees.

Even if the cost-of-living adjustment for 2026 surpasses TSCL’s and Johnson’s respective forecasts, it won’t be enough to pull retirees out of this lose-lose scenario in 2026.