Key Points
-
The first of three data points needed to determine the coming year’s increase in Social Security’s benefit payments is now in hand.
-
Although the next two pieces of information could end up being markedly different than the first, that’s unlikely.
-
While every beneficiary’s COLA raise is the same percentage, on a dollar basis, everyone’s is slightly different, since the increase is relative to your current benefits payment.
We don’t have the official number just yet; we won’t get that until October.
But based on the inflation data we do have through July, we’ve got a pretty good idea of what 2027’s cost-of-living adjustment — or COLA — to Social Security‘s benefits payments will be. Following last week’s update to the Bureau of Labor Statistics’ measure of consumer inflation, retiree advocacy group The Senior Citizens League now predicts that beginning in January 2027, Social Security payments will grow 3.6% from their current levels. That would push the average retiree’s monthly payment up to roughly $2,146.
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 »
Here’s what you need to know.
Inching toward certainty
If you’re reading this and aren’t aware, the Social Security Administration raises its beneficiaries’ payments every year to offset the impact of inflation. It’s not an arbitrary cost-of-living adjustment, though. It’s determined by the Bureau of Labor Statistics measure of inflation, although not the one you might be thinking.
The headline figure widely circulated every month is the annualized change in the Consumer Price Index (CPI) for all urban consumers, or CPI-U. Social Security’s COLA, however, is based on the average year-over-year change of its Consumer Price Index for urban wage earners and clerical workers, or CPI-W, specifically for the months of July, August, and September. That’s why we won’t know 2027’s cost-of-living adjustment until October of this year, when September’s inflation report is finally posted.
Image source: Getty Images.
The two different consumer price indexes are usually quite close, though. For perspective, the United States’ CPU-I was up 3.4% year over year in July, while the annualized change of the CPI-W for last month was also 3.4%.
Where we are should be pretty close to where we’ll be
Obviously, something could change in August and September to lower the three-month average change in the CPI-W, which ultimately determines the following year’s cost-of-living adjustment to Social Security’s benefits payments. Not much is likely to change, however. Price changes are relatively slow. It’s also even possible that price increases could accelerate again, particularly if the conflict with Iran that’s preventing the free flow of crude oil through the Strait of Hormuz lingers, or even heats up.
In other words, where things are now and where The Senior Citizens League thinks they’ll be by the end of September are probably pretty good estimates of what’s in store, and how big the coming year’s cost-of-living adjustment to Social Security payments will be.
Just bear in mind that a 3.6% COLA means a 3.6% increase in what individual beneficiaries are currently receiving. Those who are recipients enjoying larger payments now will see a larger dollar adjustment when the time comes, simply because they’ve got a higher starting point on which their 3.6% increase is based.
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.
