Key Points
When Social Security recipients learned they’d be getting a 2.8% cost-of-living adjustment, or COLA, in 2026, many weren’t happy. And that’s understandable.
Inflation has well outpaced that 2.8% raise in 2026. And while seniors couldn’t have known that would happen at the time, many Social Security recipients are hoping for a more generous COLA in 2027 so their benefits actually stand a chance against inflation.
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Based on current estimates, it seems like seniors might get their wish.
Following Consumer Price Index data for August, the Senior Citizens League, an advocacy group, updated its 2027 COLA projection to 3.5%. Independent Social Security analyst Mary Johnson agreed with those numbers, while AARP raised its COLA forecast to 3.6%.
All of this might seem like good news. But here’s why retirees shouldn’t celebrate just yet.
1. The number could still wiggle downward
Social Security COLAs are based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. When there’s an increase in the CPI-W from one year to the next, benefits get a boost.
But because September isn’t over, we don’t have an inflation reading for the current month. And we won’t have one until mid-October, which is why an official Social Security COLA can’t be announced until then.
If the data show inflation cooled in September, the final 2027 COLA could come in lower than 3.5%. Of course, it would take a pretty drastic decrease in inflation for next year’s raise to not surpass this year’s 2.8% boost. But a 3.3% or 3.4% COLA might seem disappointing for seniors in light of the most recent projections.
2. A larger raise means higher inflation
Because Social Security COLAs are tied directly to inflation, a larger boost means prices are rising rapidly. That’s not something to be happy about.
Granted, if prices start to drop after the COLA is calculated, seniors could end up in a winning spot. But that’s not guaranteed to happen.
Also, a big problem with COLAs is that they’re backward-facing. In other words, COLAs aren’t predictive, so even if prices are expected to soar in the new year, the upcoming COLA can’t be adjusted to account for that.
3. COLAs tend to fall short anyway
Even if the 2027 Social Security COLA comes in higher than 3.6%, it will probably let seniors down anyway. That’s because COLAs have historically caused benefits to lose to inflation.
Between 2016 and 2026, Social Security benefits lost 13.7% of their buying power, according to an analysis by the Senior Citizens League. The problem boils down to a disconnect between how COLAs are measured and the cost increases that Social Security recipients actually face.
As mentioned, COLAs are based on the CPI-W, which measures cost increases for wage earners specifically. Social Security recipients, who are often retired, commonly spend their money differently.
Healthcare is often a major expense for Social Security beneficiaries. But it’s an expense that’s outpaced inflation broadly in recent years. That helps explain why Social Security’s COLAs have been falling short, even though some of those post-pandemic raises were actually quite substantial.
Seniors should keep expectations in check
It’s easy enough to get excited over a Social Security COLA upgrade. But it’s important to recognize that the number isn’t set in stone; a larger COLA means higher price increases, and a flaw in the formula could still leave seniors struggling in the new year.
Seniors who actually want to see their finances improve in 2027 should plan to take matters into their own hands. That could mean going back to work or reducing spending to the most reasonable extent possible.
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