Social Security beneficiaries are expected to see a larger cost-of-living adjustment (COLA) in 2027 than they received for this year, according to new estimates that follow the release of August inflation data.
By law, the annual Social Security COLA is calculated using the Bureau of Labor Statistics' consumer price index (CPI) inflation data for the months of July, August and September based on a variant of the dataset known as CPI-W. The COLA boosts beneficiaries' payments to account for a rise in the cost of living, and the COLA for 2026 amounted to a 2.8% increase.
The BLS released the August CPI inflation data that showed consumer prices were up 3.4% from a year ago, while the CPI-W was up 3.5% over the last year.
Several groups have released estimates for the 2027 COLA based on the data from the last two months and estimates for September's data, which have the COLA landing in a range from 3.4% to 3.6%.
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The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated that based on the latest data, the 2027 COLA will be 3.4%.
AARP projected that the 2027 COLA will be 3.6%, based on its analysis of recent inflation readings and projections for the coming weeks.
Rich Johnson, vice president of financial security at the AARP Public Policy Institute, noted that many older adults rely on Social Security for the bulk of their income and that the group's forecast aims to help them plan based on how the COLA may affect their finances.
"Family budgets have been under increasing pressure because of rising prices. The sooner that we can give them reliable information as to how much their benefits might [increase next year], the sooner they can start planning," Johnson said.
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Johnson said that the AARP's estimate incorporates the Federal Reserve Bank of Cleveland's inflation projections for September and that while those figures aren't "set in stone," the data helps compile the estimate.
"With only one month of inflation data to go until the 2027 COLA is finalized, there's less uncertainty about what that increase will be," he added. "Unless prices change dramatically in September, we're confident that the COLA will be in the mid-3% range."
The Senior Citizens League predicted the 2027 COLA will be 3.5% following the release of the August CPI inflation data, down slightly from its estimate of 3.6% the prior month. A 3.5% COLA would increase average benefit checks by $67.90 and would boost the monthly benefit from $1,940.08 to $2,007.98, TSCL reported.
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"The biggest thing we're watching with the COLA announcement coming are short-term shocks to the economy that push inflation way up or down in the next 30 days," said TSCL executive director Shannon Benton.
"No matter if the COLA announcement comes in slightly higher or slightly lower than our prediction, seniors will probably end up disappointed in the long run. The reality is that older Americans allocate their budgets differently than people still in the workforce, so inflation hits them differently. The CPI-W captures the experience of urban wage earners, which doesn't represent the average senior's budget," Benton added.
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The final piece of data for the 2027 COLA will be released on Oct. 14, when the BLS releases the September CPI inflation data.
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