With the 2026 cost-of-living adjustment (COLA) announcement looming, it’s essential to understand how COLAs work and what they mean for your Social Security benefits. Here are three key facts about COLAs that can help you prepare:
1. **How COLAs are calculated**: The Social Security Administration calculates COLAs by comparing the average third-quarter inflation data from one year to the next. It adds up the CPI-W numbers for July, August, and September of the previous year, divides them by three, and compares the result to the same period in the previous year.
2. **COLA as a percentage increase**: COLAs are represented as a percentage, which is added to your existing checks to determine your 2026 benefit amount. The difference can be significant, but it’s essential to note that COLAs don’t actually help keep up with inflation.
3. **COLAs may not offset inflation loss**: Research suggests that Social Security benefits have lost 20% of their buying power since 2010. The 2026 COLA is estimated at 2.5%, which may not be enough to cover this loss. To overcome this, consider using personal savings or exploring government benefits like SNAP and SSI.
As the official 2026 COLA announcement approaches in October, it’s crucial to plan how you’ll adjust your budget accordingly. By understanding these key facts about COLAs, you can better prepare for what’s coming and make informed decisions about your retirement income.
Source: https://eu.usatoday.com/story/money/2025/06/22/three-critical-facts-about-social-security-colas/84307582007