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 is settled.
All three keep a government pension level with prices, but each does it differently. If you hold more than one of these benefits, or you are building a projection around them, the differences matter more than the headline percentages. Below is each formula, the arithmetic, and where the announced number differs from what you 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.
Last year’s calculation, from SSA’s own table:
| CPI-W | 2024 | 2025 |
|---|---|---|
| July | 308.501 | 316.349 |
| August | 308.640 | 317.306 |
| September | 309.046 | 318.139 |
| Q3 average | 308.729 | 317.265 |
(317.265 − 308.729) ÷ 308.729 × 100 = 2.8%. That is the COLA effective with December 2025 benefits, paid in January 2026.
The formula ignores the calendar year, the twelve-month inflation rate in the news, and the CPI-U that most headlines quote. Nine months of the year are irrelevant to your raise. July, August and September decide 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. 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. 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 clocks
Canada splits the job across two programs that index on unrelated schedules, so 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 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 gap reflects the permanent 10% increase at age 75 that took effect in July 2022.
CPP is adjusted once a year, in January, using the CPI All-Items Index — but over 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. The window for the January 2027 increase does not close until October 2026, so the figure is not known until the October CPI is published. It smooths a full year of inflation instead of sampling a quarter.
| Index | Window | Effective | |
|---|---|---|---|
| Social Security (US) | CPI-W | 3-month Q3 average vs. prior base Q3 | December benefit, paid January |
| OAS (Canada) | CPI All-Items | Quarterly review | January, April, July, October |
| CPP (Canada) | CPI All-Items | 12-month average vs. prior 12-month average | January |
Three formulas, three lags. In a year when inflation is moving, they will not agree, and a plan that indexes every benefit by one flat assumption gets 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.
Medicare Part B takes part of the raise
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, independent of 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.
Hold-harmless has two limits. It applies to Part B only, not Part D, and it 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 shows up as a premium surcharge two years later. That timing 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 is similar. Our guide on avoiding the OAS clawback works through the income management side.
What to do with this
You can’t change these formulas, but you can plan around them.
- Separate the indexing assumption from the market return assumption. They are different risks. Growing benefits at your plan’s inflation number is reasonable. Growing 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 your plan relies on.
- Watch the two-year lag. Any year with unusually large realized income (a conversion, a property sale, a locked-in account unwind) sets 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 a year, CPP once, and Social Security once, each on its own index and window. That is three statutes at work, not an error in your plan.
The headline percentage is not what lands in your account. The formula, the deductions and the lag decide that.