The annual adjustment to Social Security benefits, known as the cost-of-living adjustment (COLA), plays a crucial role in maintaining the purchasing power of millions of beneficiaries. While the federal government shutdown temporarily postponed the official announcement, the final 2026 COLA figure is now expected on October 24. This adjustment is determined by inflation data, specifically the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter. Beyond the federal COLA, a significant and certain change for 2026 involves state-level taxation of Social Security income, with West Virginia moving to fully exempt these benefits, following a trend seen in other states.
Historically, the Social Security Administration (SSA) relies on inflation data from the U.S. Bureau of Labor Statistics (BLS) to compute the annual COLA. The September inflation report is the critical final piece of information for this calculation. Despite the recent government shutdown causing a delay, the BLS has confirmed that the September data will be released on October 24, enabling the SSA to make its COLA announcement on the same day. This transparency allows individuals to independently verify the COLA calculation, based on published CPI-W figures.
Projections from various expert sources, including The Senior Citizens League and independent analyst Mary Johnson, anticipate the 2026 COLA to be in the range of 2.7% to 2.8%. For the typical retired worker, this could translate to an increase of approximately $54 to $56 per month, while those with disabilities and survivor beneficiaries might see an additional $43 to $44. However, concerns persist that these adjustments may not fully keep pace with the rising cost of living, especially considering an anticipated 11.5% increase in Medicare Part B premiums for 2026.
While the federal COLA and other related adjustments like the maximum taxable earnings cap and retirement earnings test thresholds remain subject to economic data, one concrete change for 2026 is occurring at the state level. Social Security benefits can be subject to both federal and state income taxes. Federally, benefits may be taxed for individuals whose provisional income exceeds $25,000, or $32,000 for joint filers. At the state level, nine states currently impose some form of tax on Social Security income.
Among these states, West Virginia is set to completely eliminate state-level taxation on Social Security benefits by January 1, 2026. This initiative began with exemptions for lower-income individuals in the 2022 tax year and has progressed through a phased removal for all beneficiaries. Starting in the 2024 tax year, a portion of benefits became exempt, increasing in 2025, and culminating in full exemption in 2026. This move positions West Virginia alongside Kansas, Missouri, Nebraska, and North Dakota, which have also ceased taxing Social Security benefits in recent years, offering a significant financial relief to their retired residents.
Despite the initial uncertainty surrounding the 2026 COLA announcement, the financial landscape for Social Security beneficiaries is evolving. While the federal adjustments aim to mitigate inflation's impact, the guaranteed tax exemption in West Virginia represents a tangible benefit for retirees in that state. This trend of states re-evaluating their taxation of retirement benefits highlights the diverse financial considerations retirees must navigate.
