The US Social Security Administration (SSA) is all set to announce the annual cost-of-living adjustment (COLA) on Friday. Ahead of the big reveal, which would help shape the expenditure charts for 2026 for several individuals, there has been quite a buzz around the annual raise. As per a Bankrate report, the estimated annual COLA increase is expected to be around $648 for an income of $2,008.
The COLA that will be announced on October 24 will be applicable to beneficiaries starting in January. In numbers, this increase percentage will be around 2.7 per cent for 2026. In comparison, the average COLA raise for the last 25 years is 2.58 per cent, stated the report.
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What is COLA, and how is it calculated?
In brief, COLA can be best described as an increase in benefits in Social Security as well as Supplemental Security Income, which helps the beneficiary in adjusting to inflation, according to Investopedia.
As per the SSA website, the 2025 COLA percentage is 2.5 per cent. It is calculated every year through a specific formula designed by the Social Security Act. It depends on factors such as the Consumer Price Index, which in turn is determined by the Bureau of Labor Statistics.
Through COLA, Social Security beneficiaries can keep pace with inflation and the increased prices of other consumer goods. It was enacted in the US legislation in 1973.
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COLA estimates for the coming year
The estimated COLA raise is expected to be 2.7 per cent. This means that for every $1,000 in a person’s income, they will earn an extra $27. So, if the social security income is $2,008, it will now be updated to $2,062 per month, leading to an increase of $648 per year. However, as per the Bankrate report, this adjustment may not be enough to tackle inflation.
The beneficiaries are still expecting this to be more than expected, reported CNBC. In 2024, the COLA was 3.2 per cent, while it was low at 2.5 per cent this year. Citing Goldman Sachs Asset Management, the report suggests that the cost of retirement has outpaced inflation. Retirees would need a raise of more than 2.7 per cent to adjust their cost of living in sync with inflation.
FAQs:
1. What is the expected COLA for 2026?
The cost-of-living adjustment is estimated at 2.7%, or about $648 more per year for an average $2,008 monthly benefit.
2. When will the new COLA be announced?
The SSA will announce the 2026 COLA on Friday, October 24.
3. When does the new COLA take effect?
The increase applies to payments starting January 2026.