"While inflation has been surging in recent years in the post-pandemic era, the Federal Reserve targets a 2% inflation rate. This means that it is normal and expected for the cost of goods and services to rise around 2% annually. If prices are continually going up but benefits aren't, then retirees would be able to purchase much less with their benefits over time if it weren't for Cost of Living Adjustments that increase their checks."
"COLAs are calculated based on the year-over-year changes to a basket of goods and services. Specifically, third-quarter data is compared for a price index called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This third-quarter data recently became available on October 24. Based on CPI-W changes for July, August, and September, retirees will get a 2.8% COLA next year."
Social Security beneficiaries will receive a 2.8% Cost-of-Living Adjustment in 2026 based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). COLAs raise monthly benefits to preserve retirees' buying power against inflation. The Federal Reserve targets roughly 2% inflation, but recent post-pandemic years have seen higher inflation, prompting larger adjustments. The Social Security Administration uses year-over-year changes in a basket of goods and services, comparing July, August, and September data to determine the annual increase that will apply to benefits next year.
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