Key Points
-
One expert lowered her 2027 COLA projection after seeing inflation cool in June.
-
A smaller Social Security raise means less rampant inflation.
-
What retirees lose in the form of a smaller boost, they might gain in the form of less expensive prices in the near term.
If you’re on Social Security, you may be itching to know what your 2027 cost-of-living adjustment, or COLA, will amount to, and you may be reading the news looking for clues.
If you saw the latest update from independent Social Security analyst Mary Johnson, you may have been bummed, to say the least. That’s because Johnson, a trusted name in the world of Social Security, recently downgraded her 2027 COLA forecast quite substantially.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
The news isn’t all bad, though. In fact, that lower COLA forecast has a clear silver lining.
What the latest COLA estimates look like
Following the release of May inflation data, Johnson projected that Social Security’s 2027 COLA would amount to 4.7%. But inflation cooled in June. As a result, Johnson updated her COLA forecast in July, stating she now expects benefits to rise just 3.7% in the new year.
Meanwhile, The Senior Citizens League, a nonpartisan advocacy group, estimates that Social Security’s 2027 COLA will be 3.8%. Either number is considerably larger than this year’s 2.8% COLA. But if you caught Johnson’s 4.7% forecast earlier in the year, her updated number may reek of disappointment.
Why the latest COLA estimate isn’t so bad
At first glance, a smaller Social Security raise might read like bad news, but it’s important to remember that those COLAs are pegged to inflation.
If Johnson’s 3.7% estimate ends up being correct, it will mean that inflation wasn’t so high over the summer. In other words, what you lose in the form of a smaller raise next year, you’re apt to gain in the form of less extreme price increases in July, August, and September.
Of course, the big wild card in all of this is Medicare. Seniors who are enrolled in Social Security and Medicare at the same time have their Part B premiums deducted from their monthly benefits.
This year, the standard Part B premium rose substantially. If there’s a repeat in 2027, it could leave seniors with a much smaller net raise.
The Social Security Administration should be making its official COLA announcement in mid-October. Until then, the best you can do is follow the news to see what the experts are saying.
You should know that if next year’s COLA projection keeps going down, it’s not necessarily a bad thing. If anything, it could spell near-term financial relief, especially if you found yourself struggling to keep up with rising costs during the spring.
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.
View the “Social Security secrets” »
The Motley Fool has a disclosure policy.
