Social Security recipients are one step closer to finding out how much their benefits will increase in 2026, thanks to the annual cost-of-living adjustment (COLA). The Social Security Administration uses inflation data to determine this yearly adjustment, which helps ensure that benefits keep pace with rising prices.

The determination of the 2026 COLA relies on a specific measure of inflation: the Consumer Price Index for Urban Wage Earners and Clerical Workers, often shortened to CPI-W. This index tracks the changes in prices for a basket of goods and services typically purchased by urban wage earners and clerical workers, providing a snapshot of the cost of living for a significant portion of the population.

The Social Security Administration doesn't use a single month's CPI-W figure to calculate the COLA. Instead, they average the CPI-W data from the third quarter (July, August, and September) of the current year. This average is then compared to the average CPI-W from the third quarter of the previous year. The percentage increase between these two averages becomes the COLA, which is applied to Social Security benefits starting in January of the following year.

We now have two out of the three crucial data points needed to determine the 2026 COLA: the CPI-W figures for July and August. The September figure, which will be released in mid-October, will complete the picture. Once all three months of data are available, the Social Security Administration will calculate the average and announce the official COLA for 2026.

While it's still too early to predict the exact COLA with certainty, the July and August CPI-W data provide valuable insights into current inflation trends. These trends will play a significant role in determining the size of the adjustment, which will directly impact the financial well-being of millions of Social Security beneficiaries. Stay tuned for the release of the September CPI-W data and the official COLA announcement in the coming weeks.