Do You Understand These 3 Critical Facts About Social Security COLAs?

By Matt Frankel, CFP – Feb 25, 2026 at 6:11AM ESTKey PointsSocial Security COLAs are based on just three months' worth of inflation data.The metric used to measure inflation isn't the best one for senior-specific costs. Medicare premiums can lower your effective COLA. We’re bullish on these 10 stocks ›There are some things about COLAs that aren't widely known.Social Security beneficiaries typically receive an annual adjustment in their benefits to help keep up with rising costs, known as the cost-of-living adjustment, or COLA.

The Social Security COLA was 2.8% in 2026, and over the past 30 years, it has ranged from 8.7% to 0% (no adjustment at all). While the basic idea behind the COLA is widely known, many people aren't familiar with some important facts about how it works. With that in mind, here are three Social Security COLA facts you should be aware of, and why they matter. 1. Social Security COLAs are only based on third-quarter inflation You may be aware that the annual Social Security COLA is officially announced in October. But you might not know that the reason is that the COLA depends only on three months of inflation data -- July, August, and September. Image source: Getty Images.

The Social Security Administration (SSA) looks at inflation data for this three-month period and compares it with the same three months from the previous year. Since September's data is needed to make it official, and it is released a couple of weeks into October, that's why the COLA announcement is timed the way it is. 2. Social Security COLAs use the CPI-W It might surprise you to learn that the inflation metric used to determine the COLA is designed to track cost increases for working Americans. Specifically, it uses the CPI-W, which stands for the Consumer Price Index for Urban Wage Earners and Clerical Workers. There is a senior-specific inflation metric called the CPI-E, which weights costs like healthcare slightly more, and, as you might expect, this type of inflation has outpaced the CPI-W over the past decade. 3. Medicare premiums also play a big role Finally, one important fact that many new beneficiaries find out the hard way is that it isn't just the Social Security COLA that determines how much of a raise you'll get next year. Medicare premiums also change from year to year.

Most Social Security recipients who are 65 or older pay their Medicare Part B premiums directly from their Social Security benefits. And in some years, the increase in the Medicare Part B premium can consume a lot of your COLA. In 2026, the average Social Security benefit increased by about $55 thanks to the 2.8% COLA. However, Medicare Part B premiums increased by about $18, so the actual "raise" the average retiree received was $37.Read NextFeb 25, 2026 •By Christy BieberAre You Richer Than Other People Your Age?Feb 25, 2026 •By Maurie Backman4 Big Problems With Medicare Advantage All Retirees Need to Know AboutFeb 25, 2026 •By Maurie BackmanThere's Good News and Bad News About Social Security's 2027 Cost-of-Living Adjustment (COLA)Feb 24, 2026 •By Maurie BackmanAre You Falling for These 3 Medicare Myths?Feb 24, 2026 •By Maurie Backman3 Signs You Should Wait 1 More Year to RetireFeb 24, 2026 •By Leo SunHigh Quality of Life, Lower Costs: These Ranked Retirement Places Deliver BothAbout the AuthorMatt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.TMFMattFrankelX@MattFrankelCFP