The nearly are slated to find out on Oct. 14, 2026, how much their monthly check will rise. This , or COLA, is how the government tries to make sure that the value of Social Security benefits keeps up with inflation. Without it, the same payment would cover less of what recipients are spending on medical care, housing, groceries, clothing and other necessities.
I am a finance professor, and one of the topics I research is how . And I believe the upcoming bump doesn’t capture the inflation challenges that many people who receive Social Security benefits face.
The percentage increase in Social Security benefits depends in part on the annual , which the Bureau of Labor Statistics, a government agency, will also release on Oct. 14. It , according to the BLS. Experts have no doubt that the cost-of-living adjustment for 2027 will be far above the and . Many forecasts .
But the size of the increase is only part of the issue. The index used to set the COLA reflects what working people buy, not retirees, and that is a mismatch at the heart of a long-running debate over how the adjustment should be measured.
Calculating the COLA
The government has to keep up with inflation since 1975. Congress previously had to pass a law each time it increased benefits. As a result, years could pass without an adjustment, despite climbing prices.
The metric that the government uses is its , known as the CPI-W. The Bureau of Labor Statistics tracks changes in the prices of goods and services that working households typically buy to calculate this index.
The Social Security Administration then compares the average CPI-W reading for July, August and September with the average for those same months in the prior year to set the COLA adjustment, which kicks in the following January.
If the economy contracts and prices fall, however, . That happened in 2009, 2010 and 2015.
Spending much of the bump on premiums
One big problem with this calculation is that it understates healthcare inflation.
Out-of-pocket health costs, including for medical care and prescription drugs, typically consume nearly 30% of Social Security benefits, according to research from the nonpartisan .
For example, the government deducts directly from many retirees’ Social Security checks. The in 2026, from $185 to $202.90. That increase alone consumed roughly one-third of the average $56 monthly gain in benefits from the 2026 COLA.
More broadly, this big jump in healthcare costs for people covered by Medicare, as , helps explain why there is a long-running debate over how the program measures inflation.
Finding other options
Critics of the system the government uses to adjust benefits for inflation, including the and the , say the CPI-W reflects the spending habits of working people, who shell out less on medical care than retirees. Retirees also tend to spend less on clothing, education and transportation than people with jobs.
There are other ways the government measures inflation, including the , known as the CPI-E, that could be more accurate. The Bureau of Labor Statistics began to calculate this experimental index in the 1980s, but the Social Security Administration has not used it to set benefits yet despite to make the switch.
The National Committee to Preserve Social Security and Medicare has researched how much more older people spend on medical care. People 65 and older as younger Americans on out-of-pocket health and medical costs, the group estimates.
Those 75 and older spend nearly three times as much, the committee estimated after reviewing data from 1982 through 2014. It argues that a CPI-E weighted more toward medical care, housing and recreation would yield slightly larger cost-of-living adjustments than the CPI-W.
But an index tied to how older people generally spend their money does not always lead to a bigger cost-of-living adjustment. The CPI-E has . What’s more, the CPI-E was not designed to set benefits and would need a larger survey sample before it could be used for that purpose.
, Professor of Finance,
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