Key Points
-
Social Security’s cost-of-living adjustments help beneficiaries keep up with rising costs.
-
Though it’s too soon for an official COLA announcement, estimates exist for next year’s raise.
-
A new inflation report just reset those projections.
Social Security isn’t a benefit that retirees only get to collect for a handful of years. For some people, those monthly checks could continue for decades. That’s why the program’s cost-of-living adjustments, or COLAs, are so important.
The purpose of Social Security COLAs is to adjust benefits each year in line with inflation. If those COLAs didn’t exist, many retirees would not have a way to keep up with rising costs, since plenty of Social Security recipients rely on those benefits for most or even all of their senior income.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
While it’s too early in the year to make an official Social Security COLA announcement, experts can use current inflation data to take an educated guess on next year’s raise. A recent inflation report just changed that number in a very significant way.
Seniors could be in line for their biggest COLA in years
In May, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.4% on an annual basis. The CPI-W serves as the basis for Social Security COLAs each year.
Specifically, CPI-W readings from July, August, and September are compared to the previous year. If there’s an increase during that time period, Social Security benefits go up the following year.
Based on the most recent CPI-W data, The Senior Citizens League, an advocacy group, is projecting a 3.8% Social Security COLA for 2027. That’s significant, because earlier in the year, experts were predicting that 2027’s COLA might mimic 2026’s 2.8% raise — an increase many retirees found insufficient.
If Social Security benefits do increase 3.8% in 2027, it would mark the largest raise in four years. It would also raise the average Social Security benefit by about $77 a month.
Why retirees might still feel pressured financially
While a 3.8% COLA might spell relief in the new year, the problem is that COLAs tend to lag behind the real-world costs Social Security recipients face.
The CPI-W does a great job of capturing the costs of wage earners. However, since it doesn’t focus on retirees, seniors tend to end up with COLAs that make it hard to keep up with their specific expenses.
The other problem is that if Social Security benefits do indeed rise by 3.8% in the new year, that increase will come at the cost of sustained inflation. That could strain retirees’ paychecks during the second half of 2026, especially since this year’s 2.8% COLA is already set in stone.
Of course, a lot could change between now and October, which is when an official COLA announcement usually comes out. So seniors shouldn’t get too hung up on that 3.8% projection. They should, however, brace for some potentially tough months ahead and budget carefully, especially if costs remain elevated.
The $23,760 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Join Stock Advisor to learn more about these strategies.
The Motley Fool has a disclosure policy.
