If you are enrolled in Social Security, October will be one of the most important months of the year.
That is the month that the federal government is expected to announce whether there will be a cost-of-living adjustment (COLA) to next year’s Social Security benefits.
Learn more about this announcement and the impact it will have on the financial fitness of retirees everywhere.
What is a COLA?
Since 1975, the government has used the Consumer Price Index to determine whether to give Social Security beneficiaries a cost-of-living adjustment (COLA) on their benefit.
This COLA is added on to the amount a beneficiary already receives from the program. So, thanks to the COLA, retirees have a bit more income to enjoy every month.
For 2026, the COLA was 2.8%. The announcement of that COLA occurred on Oct. 24, 2025.
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How is a COLA calculated?
Federal law requires that a specific formula must be used to calculate each year’s COLA.
On a monthly basis, the U.S. Bureau of Labor Statistics (BLS) determines whether there has been an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The COLA itself is based on the percentage increase in the CPI-W “from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective,” according to the Social Security Administration (SSA).
Any increase in the CPI-W over that time is rounded to the nearest tenth of one percent.
Why does the government give out COLAs?
The government established COLAs to make sure retirees are better able to keep up with the ravages of inflation.
Until recently, inflation was not really an issue for most Americans. Beginning in the 1980s, inflation remained low for many decades.
But in the wake of the COVID pandemic, prices suddenly shot higher. Although inflation has come down a bit in recent years, it remains elevated compared to previous periods.
This surge in the price of goods and services has made COLAs more important for retiree budgets than they have been in the recent past.
How does a COLA impact retirees?
If you receive Social Security, the annual COLA helps to bump your monthly benefit a bit higher.
For example, the 2.8% COLA for 2026 meant that Social Security beneficiaries are receiving an average of $56 more in their monthly benefit payment than they were in 2025.
Is a COLA guaranteed each year?
In most years, there is enough inflation to support a COLA. However, there have been a few years where prices remained so under control that the government did not announce a Social Security COLA.
The years 2009, 2010, and 2015 are examples of periods when no COLA was issued.
What will happen in October?
With inflation still relatively high and actually rising in recent months, it is expected that the government will announce a 2027 COLA on Oct. 14 of this year, when the September 2026 CPI-W is scheduled to be released by the Bureau of Labor Statistics.
In addition, the SSA traditionally has used this announcement to preview changes to the maximum amount of earnings subject to Social Security tax. This amount will be based on any increase in average wages.
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What is the early prediction for next year’s COLA?
The most recent projection by The Senior Citizens League is that next year’s COLA will be 3.8%, or a full percentage point higher than in 2026.
In May, the CPI-W reading showed a 4.4% year-over-year jump. Factors such as the conflict with Iran are helping to push prices higher. That in turn makes a higher COLA more likely.
If the 3.8% projection becomes fact, average benefits for Social Security beneficiaries would rise by $77 a month, according to The Senior Citizens League.
Is a COLA really a good thing?
Instinctively, many retirees are likely to celebrate when they hear they soon will get a bigger Social Security payment. But in reality, a COLA is a mixed blessing at best. That is because a bigger COLA essentially means prices are continuing to rise. And nobody likes that.
The 2026 COLA was 2.8%. If The Senior Citizens League is right in its projection that the next COLA will be 3.8%, it means inflation is actually marching higher in 2026.
As the price you pay for many goods and services continues to rise, you are likely to quickly spend any additional money you receive in your Social Security benefit. The reality is that a higher COLA means today’s retirees are simply running to stand still when it comes to maintaining their purchasing power.
Bottom line
In October, it is expected that retirees will learn they will receive a cost-of-living adjustment to their Social Security benefit.
But this is no cause for celebration. While a COLA might appear to put extra cash in your pocket, the reality is that higher prices will soon absorb that extra money.
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Author Details
Chris Kissell
Chris Kissell is a writer and FinanceBuzz editor whose work has been featured at U.S. News & World Report, Forbes, MSN Money, Fox Business, Yahoo Finance, Bankrate, Money Talks News, and more. He writes mainly about personal finance, insurance, and health issues.
