Social Security COLA 2027: Retirees May Want to Brace Themselves for Bad News

We're still months away from the Social Security Administration's official announcement of the 2027 cost-of-living adjustment (COLA), but some experts are already making predictions about where next year's adjustment may land.

The Senior Citizens League, a nongovernmental advocacy group, uses inflation data released monthly by the Bureau of Labor Statistics to forecast future COLAs. The official announcement will come in October, as it's based on third-quarter inflation data. But there's already some rough news for retirees.

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Surging inflation is bad news for retirees

The Senior Citizens League predicts that the 2027 COLA will be around 2.8%. That figure is unchanged since January, when the organization forecast a 2.5% COLA for 2027.

The good news for retirees is that next year's adjustment will likely be roughly the same or perhaps even higher than the 2026 raise. The bad news is that that's because inflation has been surging again.

According to Consumer Price Index data published last week, the annual inflation rate reached a two-year high of 3.3%, up 0.9% over the last month. This is largely due to soaring oil prices caused by the war in Iran.

More expensive oil not only raises gas prices for consumers. Businesses are also affected, as it now costs more to transport goods and manufacture plastic products, fertilizers, and other items that use oil in their production. All of these factors can lead to higher prices, and the longer the war in the Middle East goes on, the more inflation is likely to surge.

Because the COLA is calculated based on the inflation rate, higher costs mean retirees will likely see a larger raise in 2027. But if history shows anything, it's that it likely won't be enough.

The COLA has consistently fallen short

Although the COLA is designed to help benefits maintain their buying power over time, it has historically fallen short of what retirees need to survive.

Between 2010 and 2024, there were only five years in which the COLA outpaced the inflation rate for that year, according to data from The Senior Citizens League. Even the record-breaking 5.9% COLA in 2022 fell short of the 7% inflation rate that year.

Most retirees are feeling the pinch, too. According to The Motley Fool's annual Social Security COLA Survey, 68% of beneficiaries say that this year's 2.8% adjustment will offer little to no help in covering everyday expenses. With inflation on the rise yet again, even a slightly higher COLA may not provide the reprieve retirees need.

Retirees are also disproportionately affected by surging inflation. Most older adults live on a fixed income, and the COLA is the only wage increase they receive. Housing and groceries also make up a significant portion of most retirees' budgets, and these costs are especially high compared to many other expenses.

There may not be much retirees can do on their own to combat inflation. However, simply staying informed and keeping realistic expectations about how far the COLA may go can help you plan accordingly.

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