COLA Increase 2026: How It Works
A primary driver of the annual COLA is inflation. Following the spike to 40-year highs in 2022, caused by factors including pandemic-related stimulus, increased consumer spending, and supply-chain disruptions, the Federal Reserve implemented a series of interest-rate hikes to cool the economy.
While inflation has moderated, it remains a concern for many Americans, continuing to affect household budgets. The annual COLA is the mechanism by which Social Security benefits are adjusted to reflect changes in the cost of living. The SSA calculates the percentage change between the average CPI-W in the third quarter of the current year and the third quarter of the previous year to determine the adjustment.
The 2026 COLA of 2.8% is more modest than some recent increases, including the historic 8.7% adjustment in 2023, which was the largest since 1981’s 11.2% increase and boosted average monthly benefits by more than $140. The lower COLA for 2026 reflects continued easing of inflation from its recent highs.
