The Calculation: How Social Security Determines the Official Rate

While advocacy groups release monthly predictions, the official adjustment relies on a strict, legally mandated timeline. The Social Security Administration does not look at inflation across the entire calendar year. Instead, they focus exclusively on the third quarter.

The Bureau of Labor Statistics gathers CPI-W data for the months of July, August, and September. In mid-October, the government averages the data from these three months and compares it to the third-quarter average from the previous year. If the current year’s average is higher, the percentage difference becomes the official COLA for the upcoming year. If prices remain flat or decrease (deflation), benefits stay exactly the same—the law prohibits Social Security from reducing benefits due to deflation.

Once the government announces the official rate in October, the Social Security Administration applies the adjustment to benefits payable in January. Because Social Security pays benefits a month in arrears, the increase officially takes effect in December but shows up in the payment you receive in January 2027.