Grocery Prices Rose 1.8% in September. Here's How That Compares With Social Security's 2027 Cost-of-Living Adjustment (COLA).

If it seems like your grocery bills are still getting bigger, you're not imagining things. They are. Although at-home food prices didn't rise between August and September, according to the Bureau of Labor Statistics, last month's average household grocery costs were up by 1.8% year over year.

That's not catastrophic. It's below the long-term average, in fact. It's also not the whole story. These same prices were up 2.1% year over year in August, and 2.6% higher in July, extending a cool-down period following an uncomfortable pace of price increases seen for the better part of last year. Indeed, compared to five years ago, consumers are paying about 22% more for groceries now.

There's some (relatively) good news on this front, however.

Higher food costs are more than covered, but...

The annual cost-of-living adjustment -- or COLA -- that the Social Security Administration makes to its benefits payments at the beginning of every year is based on a number of ordinary living expenses ranging from food to housing to transportation to healthcare.

It's not an equal-weighted average of these inputs, though. Since housing is most households' single-biggest expense, its change makes the biggest net impact on the annualized inflation rate used to determine any given year's COLA. Conversely, entertainment makes up a relatively small portion of the average household budget, so it doesn't make a major impact on the Bureau of Labor Statistics' measure of inflation.

Image source: Getty Images.

That's the relatively good news for any retirees currently receiving Social Security retirement benefits. While grocery price hikes are finally starting to somewhat level off, continued price increases on other fronts -- gasoline and utility bills in particular -- made for a dandy of a cost-of-living adjustment for the year ahead. This past week, the Social Security Administration announced next year's benefits payments will be 3.6% bigger than this year's. Based on the typical monthly payment right now, this will mean an average increase of about $75 per month.

No net "win," and even a possibility of added financial stress

While seniors are seemingly coming out ahead compared to food costs with the latest COLA, like everyone else, they're losing out to higher transportation and housing costs. They were also already technically behind on the grocery price front thanks to soaring food costs in 2022 that weren't fully offset by that year's -- or any following year's -- COLA. It all more or less evens out when all is said and done.

Also know that nobody gets their cost-of-living adjustment until after the fact. That is to say, while the Social Security Administration is offsetting beneficiaries' higher living expenses, they've already shouldered this burden for up to 12 months. If they weren't prepared for any additional financial strain, it's possible these seniors could be in a tougher financial situation than they were a year ago, just because they've needed to come up with some extra cash to cover all of these price increases in the meantime. If that meant borrowing at today's interest rates, the upcoming COLA is a bit too little, and too late.

The Motley Fool has a disclosure policy.