There is less time left for the Social Security Administration to make the official announcement of the expected figure for the Cost of Living Adjustment (COLA) for next year. However, they have already provided a preview to beneficiaries, with an estimated figure for 2026. The percentage is estimated to be 3%, which is good news at first glance. This means an increase in the income received by retirees.
However, an increase in COLA implies a generalized increase in prices due to rising inflation, which is not such good news. To calculate COLA, it is necessary to have the Consumer Price Index (CPI-W). The index for the third quarter (July, August, and September) of the current year is compared with the values from the same period of the previous year. The difference between the two will determine COLA for the following year.
Social Security Administration (SSA)
The Social Security Administration (SSA) is the agency belonging to the government of the United States that is responsible for safeguarding the interests of the insured, whether they are retirees, low-income citizens, or individuals with disabilities. According to its own website, it is responsible for managing the national social insurance program composed of retirement, survivor, and disability insurance programs. It administers the Supplemental Security Income program for the elderly, blind, and disabled. Additionally, it is the agency to contact to apply for Social Security numbers for individuals residing in the United States. Programs such as the Supplemental Nutrition Assistance Program (SNAP) and health insurance programs like Medicare or Medicaid are also its responsibility.
Cost of Live Adjustment (COLA)
The Cost of Living Adjustment (COLA) aims to ensure the balance between the purchasing power of Social Security beneficiaries and Supplemental Security Income (SSI) recipients with the price increases resulting from inflation. To calculate it, it is necessary to take data from the Consumer Price Index (CPI-W), determined by the Bureau of Labor Statistics of the U.S. Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.
How is it calculated?
The Consumer Price Index for Urban Wage Earners (CPI-W) is published by the Bureau of Labor Statistics of the United States and is used by the Social Security Administration (SSA) to calculate the COLA. Its calculation is quite simple: the average CPI-W index for the third quarter, that is, the months of July, August, and September of the current year, is calculated. That figure is compared with the average for the same period of time in the previous year. The resulting percentage difference is the COLA that will be applied the following year.
What has the Social Security Administration (SSA) announced?
The Social Security Administration (SSA) announces the COLA percentage for the following year annually, in the month of October. There is less time left to know officially what the figure for the year 2026 will be. Meanwhile, the SSA has made an official announcement with a preview of what is expected to be the COLA for 2026. Taking into account the delicate situation that the United States is going through, and the undeniable impact that the tariff policy imposed by Donald Trump has had on its economy, inflation is on an upward slope, which has been reflected in the cost of living for Americans.
According to the SSA report, the COLA percentage for 2026 could be 3%, one of the highest in a long time. At first glance, this is good news, as if so, the average retired worker would see an increase of $60 in their monthly check, rising to $2,060. We cannot overlook that an increase in the COLA is the result of an increase in inflation and prices, which is not good news. We will have to wait for the SSA to make an official statement, and we will see if the figures represent a significant increase in the quality of life for beneficiaries.
