What Will the 2027 Social Security COLA Be? History Says It Won't Be Huge.

If you're a retiree collecting Social Security benefits -- or you're just a Social Security enthusiast -- you're probably eagerly awaiting the announcement of the next cost-of-living adjustment (COLA) for Social Security benefits.

That announcement is expected on Oct. 14, but until then, experts are weighing in with educated predictions.

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Understanding Social Security COLAs

The fact that Social Security benefits get adjusted nearly annually to keep up with inflation is a very good thing, helping retirees preserve the purchasing power of this income stream. Without inflation adjustments, some retirement streams (such as, for example, some annuity payments or pensions) could lose a lot of purchasing power over time.

To set the stage, here are recent COLAs:

Data source: Social Security Administration.

The historical average COLA increase is around 2.6%.

It's worth noting that these increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) -- a measure that, oddly, focused on workers. It would be more logical to base increases on the Consumer Price Index for the Elderly (CPI-E), which weighs categories such as healthcare more heavily. After all, healthcare spending in retirement can be a major expense.

The upcoming COLA

So what of the upcoming COLA to be announced this year? Well, until recently, it was expected to be 3.8%, per the nonpartisan Senior Citizens League -- an organization many look to for these estimates. But now the Senior Citizens League has ratcheted down its estimate to 3.6%.

Mary Johnson, an independent Social Security and Medicare policy analyst, has lowered her prediction from 4.7% to 3.7% to 3.4% over the past few months.

Here's what a 3.5% increase (an average of those 3.4% and 3.6% predictions) will look like:

Those increases may not look huge, and they aren't, but they can still help those on fixed incomes, especially as benefits grow more and more over time.

A looming crisis

Here's a problem, though: With more people retiring early and living longer, the ratio of workers to beneficiaries has been shrinking -- and Social Security's surplus is shrinking. When the surplus that the program had long run is gone, we won't see Social Security benefits stop, but if nothing is done, they're likely to shrink.

Here's the scoop, per the Trustees of the Social Security and Medicare trust funds, in their 2026 report:

The OASI Trust Fund is projected to become depleted in the fourth quarter of 2032, one quarter earlier than projected in last year's report. Upon reserve depletion in 2032, projected income is sufficient to pay 78 percent of scheduled benefits. This percentage declines gradually to 62 percent by 2100.

So in the near future, your benefit might rise by, say, 3%, but then fall by 22%. Yikes! Fortunately, there are ways to fix Social Security, if Congress takes action.

For now, though, we can wait until Oct. 14, to see what the next COLA is.

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