Social security Beneficiaries are expected to receive a larger cost of living adjustment (COLA) in 2027 amid continued high inflation this year, according to a new report.
An analysis from the Senior Citizens League (TSCL) predicts the 2027 COLA will be 3.8%, 1 percentage point higher than the 2026 COLA of 2.8%, based on the latest Consumer Price Index (CPI) inflation data released Tuesday. TSCL estimated that if the projected 3.8% COLA took effect today, average profits would increase by $73.62, from $1,937.53 to $2,011.15.
The estimate for a COLA of 3.8% was the same as last month’s forecast and is down slightly from the 3.9% projection made in April.
According to the law, the annual Social Security COLA is calculated using CPI inflation data from the Bureau of Labor Statistics for July, August and September. The announcement of the final COLA amount typically occurs in mid-October, with the agency’s release of September inflation data.
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Social Security benefits could increase by 3.8% in 2027, according to the latest estimate from next year’s COLA. (Getty Images/iStock)
“We are seeing rising inflation while more than half of seniors already cannot afford basic standard of living” said Shannon Benton, executive director of TSCL, after the group’s estimate was released in June, which also projected a COLA of 3.8% for 2027.
“We’re talking about food, shelter and transportation. Many older adults already have to avoid doctor’s appointments because of costs, costing us all more in the long run when we trade preventative care for emergency care,” she added.
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Social Security COLA aims to keep benefits in line with inflation. (Wesley Lapointe/For the Washington Post via Getty Images)
THE latest CPI inflation data showed that prices were up 3.5% from a year ago in June, a level well above the Federal Reserve’s 2% target and one that creates significant pressure on household budgets as wage gains may not keep up with the rising cost of living.
The CPI-W, which is the version of inflation the measure used to calculate Social Security’s COLA, was up 3.5% from a year ago in June.
A larger COLA would also exacerbate the financial problems facing Social Security, which is on a path that would lead to the insolvency of a key trust fund, which could in turn lead to benefit cuts.
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The main Social Security trust fund is at risk of running out in 2032, which would result in an automatic reduction in benefits if Congress does not act. (Getty Images/stock)
The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated in May that a 3.8% COLA in 2027 would widen the Social Security budget deficit by about $300 billion over the next decade and advance the insolvency of a key trust fund by three months from the end of 2032.
Once the trust fund is depleted, the Social Security Administration will be required by law to reduce benefits to match incoming payroll tax revenue, which CRFB estimates will result in a 25% off for beneficiaries, it would “erase nearly a decade of COLA increases.”
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