2026 Social Security Cola: A little-known data shift that could affect benefits for millions of retirees

More than 57 million retirees rely on Social Security benefits, and the Cost of Living Adjustments (COLA) is usually raised in October each year. This salary increase is based on inflation data collected by the Bureau of Labor Statistics (BLS).

However, the recent decision by BLS to reduce data samples has raised some concerns. Experts are worried that this could lead to more accurate inflation numbers, bringing the coke for potentially social security beneficiaries to be smaller, leaving them with less purchasing power.

BLS stopped collecting data from three cities in the second quarter. There is a shortage of staffing shortages, including Lincoln, Nebraska, Provo, Buffalo, Utah, and Buffalo, New York, among others, due to current employment freezes.

“Economists say the lack of staffing raises questions about the quality of recent inflation reports. There is no indication of intentional efforts to publish false or misleading statistics. However, issues with data can have a major impact on the economy,” the Wall Street Journal reported.

The formula for determining the cola is simple. The Social Security Administration (SSA) compares the average consumer price index for urban wage workers and administrative workers (CPI-W) for the third quarter of this year (including July, August and September), and compares it with the average CPI-W for the previous year. The percentage increase is rounded to one tenth of the percentage and applied to profit. If there is no increase in percentage, cola will not be paid. In other words, cola never becomes a negative number. Therefore, even if the price index is down year-on-year, benefits levels will never be reduced.

What happened at the Bureau of Labor Statistics?

In April, BLS stopped collecting data for two cities: Lincoln, Nebraska and Provo, Utah. In June, BLS stopped collections entirely in Buffalo, New York.

In a press release, BLS acknowledges that loss of data from these cities “may increase the volatility of sub-national or item-specific indexes” but “has minimal impact on the overall total item CPI-U and CPI-W indexes.”

“This suggests that CPI figures across the country may remain stable, but there are concerns that the lack of data from these cities could lead to inaccuracy in local or item-specific inflation measurements and affect cola calculations.”

“If these regions experience higher than average inflation, their exclusion could lead to a modest national CPI and lower cola than guaranteed,” Benton said.

The reduction in data collection is rooted in part in the staffing shortages driven by employment freezes. “The Bureau of Labor Statistics said the offices that issue inflation rates this week that the hiring freeze at agents is forcing outside economists to reduce the number of companies checking prices,” according to the WSJ. This employment freeze exacerbates ongoing budget issues for agents. The Urban Institute discovered that “between 2001 and 2015, the agency (BLS) received less (money) than all requests except for two years.”

How data collected by the Statistics Bureau is used to determine cola

Distortion in CPI-W data can be higher or lower cola. Higher cola will not have a negative impact on beneficiaries, but lower cola will likely. The negative effect is exposed beyond the year it becomes effective. Low monthly benefits are the number that the next coke will be applied, which is snowballed for years.

Cola last year was a modest 2.5% due to inflation being cooled. CPI-W is a measure of inflation, so when inflation decreases, cola becomes lower. That’s a challenge for retirees. The higher the inflation rate, the more current purchasing power is compromised, but after inflation has already had a financial impact, it leads to a greater coke. Lower inflation helps keep prices down and grow the dollar, but the next year it becomes a small cola.

COLA is determined by taking the average CPI-W for the three months of the previous year’s third quarter and comparing it to the third quarter average of this year’s CPI-W. You can find the 2024 CPI-W amount below.

After the numbers are released the following month, you can plug in the numbers and estimate the cola yourself. The formula is: (TBD -308.729) / 308.729 x 100 = xx%. Next, multiply that number by 100 and roundup.

Use these four steps to determine the cola.

Step 1: Subtract the 3 month average for 2024 from the 2025 Step 2 average. Divide that number by average for 2024 Step 3: 100 Multiply by step 4: Roll it

Your Social Security Benefit: Why is Coke Accuracy so important?

When Social Security began in 1935, it was intended to replace 40% of retirement income. At the time, my retirement age was 65. But today, that number is declining. For example, if you retire at the age of 65 in 2025, Social Security will only replace 39% of your income. This decline was due to a gradual increase in full retirement age from 65 to 67 over the years, according to the Center for Budget and Policy Priorities.

Furthermore, Social Security Trust funds face looming bankruptcy, potentially reducing future profits by 23%. This makes it even more important that annual coke accurately reflects inflation, so your profits will not lose your purchasing power.

The distortion that produces lower cola will take away the beneficiaries of the money they are eligible and need to pay. Higher Coke accelerates the trust fund’s bankruptcy date by paying more profits than necessary.

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