How your CPP, OAS and Social Security raises are calculated

Two indexing events land inside the next six weeks. On October 1, Old Age Security payments rise 1.4% for the October–December quarter — a number Employment and Social Development Canada has already published. On October 14, the last input to the 2027 Social Security cost-of-living adjustment arrives, and the COLA becomes a fact rather than a forecast.

They are the same idea — keep a government pension level with prices — implemented three completely different ways. If you hold more than one of these benefits, or you are building a projection that runs on them, the differences matter more than the headline percentages. Here is each formula, the arithmetic, and where the announced number stops being the number you actually receive.

Social Security: three months decide the whole year

The COLA formula is not a judgment call. The Social Security Act specifies it, and the Social Security Administration publishes the worked calculation each year.

The index is the CPI-W — the Consumer Price Index for Urban Wage Earners and Clerical Workers, computed monthly by the Bureau of Labor Statistics. A COLA effective for December of a given year equals the percentage increase in the CPI-W from the third-quarter average of the last year a COLA took effect to the third-quarter average of the current year, rounded to the nearest tenth of one percent. If there is no increase — or the rounded increase is zero — there is no COLA at all.

Last year’s calculation, from SSA’s own table:

(317.265 − 308.729) ÷ 308.729 × 100 = 2.8% — the COLA effective with December 2025 benefits, paid in January 2026.

Note what the formula does not use: not the calendar year, not the twelve-month inflation rate you read in the news, not the CPI-U that most inflation headlines quote. Nine months of the year are simply irrelevant to your raise. July, August and September carry all of it.

What is already locked in for 2027

Because a COLA took effect in 2025, the base for the next one is the Q3 2025 average of 317.265. Against it we now have one of three months: BLS published CPI-W for July 2026 at 327.104.

(327.104 − 317.265) ÷ 317.265 × 100 = 3.10%

That is arithmetic, not a prediction. It says only this: if August and September 2026 came in exactly flat at July’s level, the 2027 COLA would round to 3.1%. August CPI publishes September 11 and September CPI publishes October 14, per the BLS release calendar — and the September release is the day the answer exists. Any figure circulating before then is an estimate of two unpublished numbers.

Canada: two pensions, two different clocks

Canada splits the job across two programs that index on unrelated schedules — which is why a Canadian retiree’s benefit income steps up at odd times of year.

Old Age Security is reviewed quarterly — each January, April, July and October — against the Consumer Price Index. Payments rise when the cost of living rises and, critically, do not fall when it drops; they hold at the same level until the index recovers.

The current quarter (July–September 2026) carried a 1.2% increase, worth 2.3% over the year from July 2025. The October–December 2026 quarter, already published, brings 1.4%, for 3.0% over the year from October 2025. Maximum monthly OAS for the current quarter is $751.97 at ages 65–74 and $827.17 at 75 and over — the 10% permanent increase at age 75 that took effect in July 2022 is still visible in that gap.

CPP is adjusted once a year, in January, using the CPI All-Items Index — but on a much longer window. The adjustment is the percentage change from one 12-month average to the previous 12-month average. For the January 2026 increase, the average CPI for November 2024 through October 2025 was 163.6, against 160.4 for November 2023 through October 2024: an increase of 2.0%, and so CPP benefits rose 2.0%. As with OAS, benefit amounts never decrease.

That 12-month averaging is why CPP indexation feels lagged. Its window for the January 2027 increase does not close until October 2026, so the figure is not determinable until the October CPI is published — and by construction it smooths a full year of inflation rather than sampling a quarter.

Three formulas, three lags. In a year when inflation is moving, they will not agree — and a plan that indexes every benefit line by one flat assumption is quietly making all three wrong. Our guides on when to take CPP and when to take Social Security go into how the claiming decision interacts with a lifetime of these adjustments.

The part that eats the raise: Medicare Part B

For most US beneficiaries the Part B premium is deducted straight from the Social Security payment — and Part B is set by its own actuarial process, on its own calendar, with no reference to the COLA.

For 2026, CMS set the standard monthly Part B premium at $202.90, which the Federal Register notice states is $17.90 higher than the 2025 premium of $185.00. That is a 9.7% increase, against a 2.8% COLA.

Run it on a $2,000 monthly benefit: the COLA adds $56.00, Part B takes $17.90 back, and roughly a third of the raise never arrives. The announced percentage is gross; the deposit is net.

There is a floor, though — and it is widely misunderstood. The hold-harmless provision (section 1839(f) of the Social Security Act) reduces the premium increase, if necessary, to avoid causing a decrease in an individual’s net monthly payment, where the Part B premium is deducted from the benefit. In practice it protects the smallest benefits: at 2026’s $17.90 premium increase, a benefit of roughly $639 a month is the point where a 2.8% COLA exactly covers it. Below that, the premium increase is trimmed.

Two limits worth knowing. Hold-harmless applies to Part B only — not to Part D, and it explicitly does not apply to anyone paying an income-related monthly adjustment amount (IRMAA). Above the 2026 thresholds of $109,000 in modified adjusted gross income for single filers and $218,000 for joint filers, the protection is gone entirely.

And IRMAA runs on a two-year delay: Social Security uses the most recent federal tax return the IRS has provided, generally the return filed two years earlier — for 2026 premiums, normally tax year 2024. A single large income event lands as a premium surcharge two years later. That is the timing that makes Roth conversion sequencing a Medicare question as much as a tax question: the conversion you do at 63 shows up in the premium you pay at 65.

Canada’s equivalent trap is the OAS recovery tax, which claws back OAS above a net world income threshold — $93,454 for 2025. It is annual rather than two-year-lagged, but the planning problem rhymes; our guide on avoiding the OAS clawback works through the income management side.

What to do with this

You cannot change these formulas, but you can stop guessing at them.

• Separate the indexing assumption from the market return assumption. They are different risks. A projection that grows benefits at your portfolio’s inflation number is fine; one that grows them at a single “raise” figure copied from a headline is not.
• Model the benefit net, not gross. If Part B comes out of the cheque, the spendable amount is the benefit minus the premium — and the premium has been growing faster than the COLA. cinder.fi’s Social Security calculator and CPP calculator let you set the claiming age and see the benefit stream a plan is actually standing on.
• Watch the two-year shadow. Any year with an unusually large realized income — a conversion, a property sale, a locked-in account unwind — is setting a Medicare premium two years out for US retirees, and an OAS recovery tax the following July for Canadians.
• Expect the schedules to disagree. A cross-border household will see OAS step four times, CPP once, and Social Security once — on a different index, over a different window. That is not an error in your plan. It is three statutes.

The percentages get the headlines. The formulas, the deductions and the lags are what determine the deposit.