The Social Security Administration has announced that the cost-of-living adjustment (COLA) to Social Security benefits in 2026 will be 2.8 percent. In a new insight, Director of Fiscal Policy Jordan Haring walks through how COLAs are calculated, why their formula may be outdated, and potential improvements.

She concludes:

Every year, SSA calculates an automatic adjustment in Social Security benefits to reflect changes in the cost of living, allowing beneficiaries to maintain the purchasing power of their benefits. The 2.8-percent 2026 COLA was calculated using the CPI-W, a narrow price index that tends to overstate inflation. While this approach roughly preserves recipients’ real benefits, it is nevertheless a somewhat outdated index. Reforms to the calculation of the COLA, such as a switch to the Chained CPI, will likely be included in any meaningful Social Security reform effort.

Read the analysis.