Upgrade PostgreSQL from 9.5 to 9.6

# Stop current Postgres server:
launchctl unload ~/Library/LaunchAgents/homebrew.mxcl.postgresql.plist
# Initialize a new 9.6 database:
initdb /usr/local/var/postgres9.6 -E utf8
# run pg_upgrade:
pg_upgrade -v -d /usr/local/var/postgres -D /usr/local/var/postgres9.6 -b /usr/local/Cellar/postgresql/9.5.4_1/bin/ -B /usr/local/Cellar/postgresql/9.6.1/bin/
# Move new data into place:
cd /usr/local/var
mv postgres postgres9.5
mv postgres9.6 postgres
# Restart Postgres:
launchctl load ~/Library/LaunchAgents/homebrew.mxcl.postgresql.plist

# Check /usr/local/var/postgres/server.log for details and to make sure the new server started properly.

# Finally, re-install the rails pg gem
gem uninstall pg
gem install pg
# ----

-> pg_upgrade -v -d /usr/local/var/postgres -D /usr/local/var/postgres9.6 -b /usr/local/Cellar/postgresql/9.5.4_1/bin/ -B /usr/local/Cellar/postgresql/9.6.1/bin/
Running in verbose mode
Performing Consistency Checks
-----------------------------
Checking cluster versions
This utility can only upgrade to PostgreSQL version 9.6.
Failure, exiting


# -----
mv /usr/local/var/postgres /usr/local/var/postgres.old
initdb -D /usr/local/var/postgres -E utf8

pg_upgrade -b /usr/local/Cellar/postgresql/9.5.4_1/bin -B /usr/local/Cellar/postgresql/9.6.1/bin -d /usr/local/var/postgres.old -D /usr/local/var/postgres
-> pg_upgrade -b /usr/local/Cellar/postgresql/9.5.4_1/bin -B /usr/local/Cellar/postgresql/9.6.1/bin -d /usr/local/var/postgres.old -D /usr/local/var/postgres

Performing Consistency Checks
-----------------------------
Checking cluster versions                                   ok
Checking database user is the install user                  ok
Checking database connection settings                       ok
Checking for prepared transactions                          ok
Checking for reg* system OID user data types                ok
Checking for contrib/isn with bigint-passing mismatch       ok
Checking for roles starting with 'pg_'                      ok
Creating dump of global objects                             ok
Creating dump of database schemas
                                                            ok
Checking for presence of required libraries                 ok
Checking database user is the install user                  ok
Checking for prepared transactions                          ok

If pg_upgrade fails after this point, you must re-initdb the
new cluster before continuing.

Performing Upgrade
------------------
Analyzing all rows in the new cluster                       ok
Freezing all rows on the new cluster                        ok
Deleting files from new pg_clog                             ok
Copying old pg_clog to new server                           ok
Setting next transaction ID and epoch for new cluster       ok
Deleting files from new pg_multixact/offsets                ok
Copying old pg_multixact/offsets to new server              ok
Deleting files from new pg_multixact/members                ok
Copying old pg_multixact/members to new server              ok
Setting next multixact ID and offset for new cluster        ok
Resetting WAL archives                                      ok
Setting frozenxid and minmxid counters in new cluster       ok
Restoring global objects in the new cluster                 ok
Restoring database schemas in the new cluster
                                                            ok
Copying user relation files
                                                            ok
Setting next OID for new cluster                            ok
Sync data directory to disk                                 ok
Creating script to analyze new cluster                      ok
Creating script to delete old cluster                       ok

Upgrade Complete
----------------
Optimizer statistics are not transferred by pg_upgrade so,
once you start the new server, consider running:
./analyze_new_cluster.sh

Running this script will delete the old cluster's data files:

./delete_old_cluster.sh
./delete_old_cluster.sh (this script is created for you automatically in current dir when you go through above steps)
rm delete_old_cluster.sh