Key Points
-
Social Security retirees could see a larger COLA next year.
-
COLA estimates are being driven up by high levels of inflation.
-
Retirees may not end up getting a win from the bigger benefits boost.
In 2026, Social Security beneficiaries received a 2.8% cost-of-living adjustment. This was higher than the COLA from the year prior but significantly below some of the other adjustments in the post-pandemic era.
COLAs are critical to the financial security of seniors who rely on Social Security for income, as the value of benefits would continually decline without adjustments to blunt the impact of inflation. Since these adjustments help seniors make ends meet, retirees are often eager for news about the upcoming COLA they’ll collect.
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 »
Recently, retirees got a major update on the COLA estimates for 2027. Here are the current estimates, along with some details on why the numbers have changed.
Image source: Getty Images.
This is the new estimate for the 2027 COLA
According to Mary Johnson, an independent Social Security analyst, retirees could be on track for a Social Security COLA of 4.7% or higher in 2027, while The Senior Citizens League (a senior advocacy group) is predicting a 3.8% increase next year.
These predictions are considerably higher than earlier estimates. Johnson, for example, had predicted a 1.2% COLA based on January data, but her estimates have been inching up throughout the year.
COLA estimates are surging for a simple reason. Bureau of Labor Statistics data released in June showed a 4.2% year-over-year increase in the Consumer Price Index for All Urban Consumers (CPI-U) in May.
This number will not be part of the official COLA formula, which is calculated using third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But it still indicates that inflation is likely to remain persistently high, leading to retirees getting a big benefits bump.
A big COLA isn’t necessarily all it’s cracked up to be
News of a bigger boost to Social Security benefits isn’t necessarily something retirees want — even if receiving more money is rarely a bad thing.
The problem is that the benefits bump is tied directly to inflation levels that remain well above the Federal Reserve’s 2% target rate. High inflation can wreak havoc on the finances of retirees who depend on income from retirement plans, which are often invested conservatively.
Few retirees end up better off with a bigger Social Security payment, while their 401(k) or IRA distributions lose buying power. But that’s exactly what often happens when prices rise rapidly. Retirees should hope that the latest inflation numbers — the highest in three years — are outliers caused by soaring energy prices due to overseas conflict, and that they end up with a much smaller raise in the end.
Otherwise, their wallets may take a hit even as their Social Security checks get bigger.
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.
