Social Security’s 2027 COLA Forecast Just Got Smaller. But There Is Good News for Retirees.

Each October, the Social Security Administration announces the cost-of-living adjustment (COLA) for the subsequent year. COLAs are designed to ensure benefit payments increase in lockstep with inflation, thereby preserving the purchasing power of Social Security.

The Senior Citizens League (TSCL) recently revised its 2027 COLA forecast lower. Despite the downward revision, there is some good news for retired workers on Social Security. Here are the important details.

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TSCL estimates Social Security's 2027 COLA will be 3.6%

The Senior Citizens League (TSCL) is a nonpartisan advocacy group focused on issues that impact seniors, especially Medicare and Social Security. TSCL conducts surveys and publishes reports, but the group is best known for its forecasts concerning Social Security's annual cost-of-living adjustments (COLAs).

Each month, TSCL updates its Social Security COLA forecast for the upcoming year based on a statistical model that incorporates known inflation data from the Consumer Price Index (CPI) as well as projected inflation data based on interest rates and unemployment.

In May, TSCL said Social Security's 2027 COLA would be 3.9%. But that number was based on the incorrect assumption that CPI inflation would continue to rise as the energy shock tied to the Iran war drove prices up across the economy. In reality, CPI inflation has moderated since May despite the ongoing conflict in the Middle East.

In August, TSCL adjusted its 2027 COLA forecast down to 3.6% to account for new inflation data. While that is modestly below estimates made in the preceding months, it would still be 0.8 percentage points higher than the 2026 COLA and it would represent the largest percent increase in benefits since 2023.

The chart below shows how a hypothetical 3.6% COLA in 2027 would impact the average Social Security benefit paid to retired workers, spouses, survivors, and disabled workers.

Data source: Social Security Administration. The chart shows the average monthly Social Security benefit before and after a hypothetical 3.6% COLA in 2027.

On the surface, TSCL reducing its COLA forecast from 3.9% to 3.6% seems like bad news. It means retired workers on Social Security will receive less additional benefit income next year than originally anticipated. However, that bad news comes with an important silver lining.

Social Security benefits are on pace to maintain their purchasing power next year

Social Security's annual COLAs are based on a subset of the Consumer Price Index known as the CPI-W, which tracks price increases based on the spending habits of workers who live in urban households where at least half of total income comes from clerical or wage occupations.

In other words, CPI-W tracks inflation based on how working-age adults spend money. But critics argue the metric should not be used for Social Security's COLAs because workers generally spend money differently than retired workers. In particular, retirees typically spend more on housing and medical care, which means the CPI-W puts too little weight on those spending categories.

What's the solution? Critics of the CPI-W usually prefer another subset of the CPI known as the CPI-E, which tracks inflation based on the spending habits of individuals aged 62 and older. CPI-E inflation outpaced CPI-W inflation by 0.7 percentage points annually over the last three years, which arguably means Social Security benefits lost more than 2% of their purchasing power during that period.

However, CPI-E inflation is currently running even with CPI-W inflation in 2026. If that trend holds through September -- inflation data from July, August, and September is used to determine the official COLA -- 2027 will be the first year in which Social Security at least maintains its purchasing power since 2023. That's good news for retirees, despite the recent downward revision in TSCL's COLA forecast.

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