The cost-of-living adjustment (COLA) applied to Social Security payments in any given year is based on CPI-W inflation from the third quarter of the previous year. In that sense, COLAs are a reimbursement mechanism to compensate retirees for the buying power benefits lost in the previous year.

The Senior Citizens League (TSCL), a nonpartisan senior group, recently released their monthly COLA estimate, predicting that it would moderate to 2.1% in 2026.

Social Security’s cost-of-living adjustment (COLA) mechanism, designed to safeguard the buying power of benefits against inflation, faces challenges as inflation trends upward. The COLA for 2025, based on inflation data from the third quarter of 2024,

The Social Security COLA gives much-needed inflation protection to retirees. Each year’s COLA is calculated by comparing inflation data from the third quarter. The CPI-E would probably be a better way to help retirees keep up with rising costs.

Social Security beneficiaries have relied on annual cost-of-living adjustments (COLAs) to maintain their purchasing power.