Key Points
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The annual cost-of-living adjustment (COLA) is meant to offset some effects of inflation.
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The official 2027 COLA will be announced on Oct. 14, and retirees will be keen to find out.
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Inflation is up because of much higher energy prices, such as gasoline and energy commodities.
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To help keep up with inflation, Social Security provides a cost-of-living adjustment (COLA) that kicks in at the start of each year. It doesn’t always keep up with real-world price increases, but it helps protect some of seniors’ purchasing power.
This year, the official COLA will be announced on Oct. 14, but with inflation data rolling in, organizations are refining their estimates. Senior advocacy group The Senior Citizens League (TSCL) currently predicts a 3.5% COLA.
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As of August, the average Social Security benefit for retired workers was $2,087.52. If the 2027 COLA is 3.5%, the average benefit would increase by $73.06 to $2,160.58. The average benefit will fluctuate as retirees pass away and others enter the Social Security program, but as it stands, someone receiving the average benefit can expect a roughly $73 monthly boost, or $877 for the year.
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How Social Security sets the annual COLA
The annual COLA is determined by changes in the CPI-W, an inflation metric that measures the changes in the price of hundreds of common goods and services. It focuses on expenses paid by hourly and clerical workers, who together account for 30% of the total U.S. population.
Setting the COLA is a three-step process:
- Average CPI-W data from the third quarter (July, August, and September) of the current year.
- Compare the average to the average from the previous year’s third quarter.
- Set the upcoming COLA as the percentage increase. If it decreases or remains the same, there will be no COLA for the upcoming year.
Over the past 20 years, the average COLA has been around 2.6%, so a 3.5% COLA would be well above average.
Inflation hasn’t slowed down yet
In July and August, the CPI-W was up 3.4% and 3.5% year over year, respectively. TSCL’s estimates mean it expects September’s CPI-W to remain around 3.5% to 3.6%. Right now, the biggest thing driving inflation is higher energy prices.
| Product or Service |
Year-Over-Year Increase |
| Energy |
16.3% |
| Energy commodities |
28% |
| Gasoline (all types) |
27.4% |
| Fuel oil |
52% |
| Energy services |
4% |
| Electricity |
3.8% |
| Utility gas service |
4.4% |
Data source: Bureau of Labor Statistics. Increase based on CPI-U data.
Crude oil prices spent some time above $100 per barrel in mid-September, so there’s a good chance that inflation remained elevated. It was the first time barrels crossed the $100 mark since May.
Regardless, any COLA estimate right now is solely an estimate. When September’s inflation data is announced on Oct. 14, the COLA will be automatically set because we’ll know the third-quarter CPI-W average.
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