Cost-of-Living Adjustments (COLA): How Annual Increases Work
Social Security benefits are adjusted each year to help keep up with inflation. Learn how the COLA is calculated, when it is announced, and how Medicare premiums can affect it.
The short version
- Benefits rise 3.6 percent for 2027, after a 2.8 percent increase for 2026.
- It is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
- Increases in Medicare Part B premiums can offset part of the COLA.
In this guide
Prices for groceries, utilities and other necessities tend to rise over time. To help Social Security and Supplemental Security Income (SSI) benefits keep up with inflation, benefits are adjusted each year through a cost-of-living adjustment, or COLA.
How the COLA is calculated
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of price changes published by the Bureau of Labor Statistics.
Social Security compares the average CPI-W for July, August and September of the current year with the same three months of the previous year. The percentage increase becomes the COLA for the next year. If there is no increase, there is no COLA, and benefits do not go down.
When it is announced
The COLA is typically announced in October, after the September inflation data is released. The increase takes effect with benefits payable for December, which are paid in January. SSI recipients see the increase starting with payments made at the end of December.
Recent COLAs
Social Security announced in October 2026 that the COLA for 2027 is 3.6 percent, beginning with benefits paid in January 2027. The COLA for 2026 was 2.8 percent. Recent COLAs have varied widely depending on inflation, from very small increases in low-inflation years to much larger increases when inflation was high in the early 2020s.
How Medicare premiums interact with the COLA
If your Medicare Part B premium is deducted from your Social Security benefit, an increase in the premium can offset part of your COLA. For example, the standard Part B premium increased for 2026 to $202.90 per month. Your net increase is the COLA minus any increase in premiums and other deductions.
A rule called the "hold harmless" provision protects most people from seeing their net Social Security benefit decrease from one year to the next because of a Part B premium increase. It does not apply to everyone, such as people who pay income-related premiums.
Where to see your new benefit amount
Social Security sends a COLA notice each December. If you have a my Social Security account, you can view your notice online, often earlier than the mailed version. The notice shows your new benefit amount and any deductions, such as Medicare premiums.
Other changes tied to the COLA
Several other Social Security figures are updated each year, including:
- The earnings test limits for people claiming before full retirement age
- The maximum amount of earnings subject to Social Security tax
- The amount of earnings needed to earn a work credit
- SSI federal payment amounts
Planning with the COLA in mind
- Do not count on a specific COLA when budgeting. It depends on inflation.
- Consider your personal inflation rate. Your expenses may rise faster or slower than the CPI-W, especially if health care or housing make up a large share of your budget.
- Review your budget each January when the new benefit amount takes effect.
Terrameritavi is an independent publication and is not affiliated with the Social Security Administration. This article is general information, not financial advice.
