Why Oct. 15 Will Be the Biggest Day of the Year for Social Security Retirees

Key Points

• Each year, Social Security retirees typically see a cost-of-living-adjustment (COLA) to benefits.

• The COLA is based on inflation data in the third quarter of the year.

• Inflation has been difficult to predict in recent months.

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There are many important dates pertaining to Social Security that retirees should be aware of. For instance, depending on when retirees' birthdays are, most Social Security recipients will get paid on the second, third, or fourth Wednesday of each month.

But I'd say the biggest annual Social Security event is the determination of the following year's annual cost-of-living-adjustment (COLA), which typically raises benefits each year to help keep pace with inflation and maintain the purchasing power of benefits. While the COLA has not yet been determined, incoming data over September will soon change that. Mark your calendar for Oct. 15, because it's the biggest day of the year for Social Security beneficiaries.

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How the COLA is determined

Each year, the Social Security Administration (SSA) uses inflation data to determine the following year's COLA. The broader stock market tends to closely follow the Consumer Price Index for All Urban Consumers (CPI-U), which tracks the price changes on a market basket of goods and services. But the SSA looks at the Consumer Price Index for Urban Wage Earners (CPI-W), which is a subset of the CPI-U and looks at prices heavily affecting blue collar workers.

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Specifically, the SSA focuses on the third quarter of the year (July, August, and September), so we are currently in the midst of COLA season. The SSA looks at the CPI-W index number for each month in the third quarter and then averages those three numbers together. Then the SSA takes the year-over-year percentage change from the average of the same months in the prior year to arrive at the following year's COLA. In the last five years, the COLA was 1.3% in 2020, 5.9% in 2021, 8.7% in 2022, 3.2% in 2023, and 2.5% in 2024.

The COLA has been difficult to predict this year because inflation initially came down at the beginning of the year but has been on the rise in recent months. People are also unsure exactly how President Donald Trump's tariffs will affect inflation.

In August, data showed the CPI-W rose 2.54% in July on a year-over-year basis, giving retirees the first piece of the puzzle. August CPI data will come out on Sept. 11, and then the September CPI-W will come out on Oct. 15, which is when the SSA is planning to announce the 2026 COLA.

This is important for retirees because it will help them better budget their future finances, especially for those who obtain a significant amount of their income from Social Security benefits. The nonpartisan Senior Citizens League (SCL), which frequently conducts research on Social Security benefits and their purchasing power, is currently projecting a 2026 COLA of 2.7%, slightly higher than this year's, although the estimates can frequently change with each new data byte.

It's a big day, but keep things in perspective

Oct. 15 is likely the biggest day on the calendar for retirees because it will determine how much their benefits increase. But they must keep a few things in perspective.

For one, the COLA is a double-edged sword. Sure, it's nice to see benefits go up, but they're rising because consumer prices are rising, meaning retirees are looking at a higher cost of living.

The SCL also conducts an annual study on the purchasing power of benefits and regularly finds that COLAs are not keeping up with inflation. In 2024, the SCL found that benefits were only worth roughly 80 cents on the dollar compared to 2010, meaning retirees lost about 20% of their buying power.

The 2026 COLA may or may not come in higher than this year's, but retirees should remember that there are pros and cons for both scenarios.

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