Americans’ monthly Social Security benefit varies significantly by individual. For those who have been collecting their benefits for multiple years, you’ve undoubtedly noticed the amount has gone up over time.
This is because of the annual Cost-of-Living Adjustment (COLA). The Social Security COLA exists to prevent seniors’ benefits from diminishing as a result of inflation.
But many people believe the system used to determine COLA is flawed, leaving retirees with less protection against rising prices than otherwise believed.
Today, I’m going to explain how the Social Security COLA is calculated, the recently announced 2027 COLA amount, why the COLA formula is considered flawed, and how it might be improved.
How Is the COLA Calculated?
The Social Security COLA is calculated based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the price of over 200 common household expenses. The index is overseen by the Labor Department’s Bureau of Labor Statistics (BLS).
Specifically, the COLA calculation is the percentage increase in CPI-W from the third quarter of the most recent year a cost-of-living adjustment was made (some years it’s zero) to the CPI-W from the current year’s Q3. The percentage is rounded to the nearest tenth of a percent.
Usually, the change for the upcoming year, if there is one, is announced mid-October. It then goes into effect beginning in January of the next year.Â
Example: Q3 2027’s CPI-W ends up being 1.5% higher than Q3 2026’s CPI-W. In mid-October 2027, the SSA would announce a 1.5% cost-of-living adjustment. The Social Security recipients’ benefits would reflect that increase starting with January 2028’s checks.
What Was the Most Recent COLA?
The 2027 Social Security COLA was announced on Oct. 14, 2026. It was set at 3.6%. Before that, the COLAs in recent years were as follows:
| Past COLAs | |
|---|---|
| Year | % Increase |
| 2027 | 3.6% |
| 2026 | 2.8% |
| 2025 | 2.5% |
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
Related: 10 Common Social Security Mistakes You Should Know
What’s Wrong With the COLA Formula?
One of the biggest flaws of using the Consumer Price Index for Urban Wage Earners and Clerical Workers is what that index represents. That is, CPI-W tracks price changes in expenses for urban wage earners and clerical workers. And their budgetary priorities can be significantly different than seniors.
Along similar lines, there’s a tendency for COLA to feel detached from inflation because of the data we’re used to reading about: the headline Consumer Price Index (CPI). When it comes to annual inflation data, we typically look at annual CPI, which is measured across the calendar year. But for the purposes of COLA, CPI-W is measured on a Q3-to-Q3 basis.
Look at the table below, and you’ll see how the CPI-W growth that led to the 2020-27 COLA increases doesn’t quite match up with the corresponding CPI growth in those same years.
| Inflation Rates | ||
|---|---|---|
| Year | CPI-W | CPI |
| 2026 | 3.6% | 3.3%* |
| 2025 | 2.8% | 2.7% |
| 2024 | 2.5% | 2.9% |
| 2023 | 3.2% | 4.1% |
| 2022 | 8.7% | 8.0% |
| 2021 | 5.9% | 4.7% |
| 2020 | 1.3% | 1.2% |
| 2019 | 1.6% | 1.8% |
| * Year-to-date as of September 2026 CPI data. Source: US Inflation Calculator |
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Then there’s the timing aspect. Your first updated Social Security check in January 2027 will be based on data from July, August, and September of 2026. That means it will have already lost ground against any additional inflation registered between October and December. By the time you collect your final check in December 2027, its purchasing power will be attached to inflation that’s more than a year old.
These disconnects are consequential. The Senior Citizens League (TSCL), in its 2026 Loss of Buying Power report, says the average Social Security payment has lost about 13.7% of its buying power since 2010.
Related: Don’t Believe These 18 Social Security Myths
How Could the COLA Formula Be Fixed?
Some of the most common proposals to bring the annual COLA more in line with seniors’ experienced costs involve changing the underlying index.
For instance, the BLS already publishes the Consumer Price Index for the Elderly (CPI-E), which uses the same inputs as CPI-W but weights the components differently to make the index more representative of a senior budget. That switch is one of the recommendations made in the proposed Social Security 2100 Act, which was introduced in 2026 by Connecticut’s Rep. John Larson and Sen. Richard Blumenthal. (Larson has introduced this bill each year in the House since 2014.)
The Senior Citizens League doesn’t think a switch to CPI-E would go far enough, and instead has proposed its own custom index.
“The CPI-BEST would guarantee a minimum COLA of 3.0%, but in years where inflation came in higher than that, calculate the COLA using the better of the CPI-W or the CPI-E,” TSCL writes. “If the government used the CPI-BEST to calculate the COLA, the average COLA for the last 10 years would be about 4.0%, compared to 2.8% using the CPI-W.”
Other suggestions that are regularly floated:
- Monthly inflation adjustments: These would combat the lag in benefit increases.
- Flat-rate COLAs: The current percentage increase provides larger dollar amount to wealthier retirees; a flat rate would give the same dollar increase to everyone, and could be used to provide better benefits to those who need them most.
- Age-based add-ons: The base formula itself wouldn’t change, but an additional amount would be added when seniors pass certain age thresholds.
Related: 10 Things That Are Cheaper When You Retire
Can Medicare Part B Premiums Go Up Even If There Is a Zero COLA?
Medicare premiums and Social Security benefits are somewhat intertwined:
- Medicare Part A: Quarterly standalone bill from Medicare if you’re not exempt from Part A premiums; never taken out of Social Security check.
- Medicare Part B: Automatically taken out of Social Security checks once benefits have started. Billed alongside Part A (if not exempt) before benefits have started.
- Medicare Part C, Medicare Part D, Medigap: Options can include check, automatic payment, credit card, and/or Social Security deductions depending on your provider.
The Social Security Act has a “hold-harmless” provision that relates specifically to Part B: It ensures your net benefits don’t decrease when the Part B premium increases at a greater rate than the same year’s COLA.
This hold-harmless provision rarely comes into play, but when it does, it typically affects a wide swath of seniors. For instance, inflation data dictated that 2016’s Social Security benefits would need to be left unchanged from 2015 levels; that year, approximately 70% of Medicare beneficiaries were shielded by the hold-harmless provision.
If you haven’t started collecting Social Security yet, you can see how much money you’ll get from Social Security online.
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