Social Security's 2027 COLA: Early Signals Hint at What Retirees Might See

When the Social Security Administration announced last year that benefits would get a 2.8% cost-of-living adjustment, or COLA, in 2026, many retirees were disappointed. And many are holding out hope for a more generous COLA in 2027.

Of course, Social Security recipients will have to sit tight a bit longer to get word of an official 2027 COLA. That's because COLAs are based on third-quarter inflation changes. And since no one can see into the future, no one can say with certainty what 2027's raise will amount to.

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Still, recent inflation readings can provide clues as to what to expect. Recent data points to a potentially larger COLA in 2027 than what seniors received this year. Whether that's a good thing, though, is up for debate.

What the current estimate looks like

In April, the Consumer Price Index rose 3.8% on an annual basis. Gasoline and fuel oil mostly drove the increase, though food and shelter costs increased as well.

Following that report, the Senior Citizens League, an advocacy group, raised its 2027 Social Security COLA forecast to 3.9%. That 3.9% projection matches April's reading for the Consumer Price Index for Urban Wage Earners and Clerical Workers, the subset of the CPI on which Social Security COLAs are specifically based.

But this doesn't mean seniors should start counting on a 3.9% raise just yet. If tensions overseas settle down and gas prices fall, inflation could trend lower in the coming months, leading to a smaller COLA. That's why it's important not to bank too heavily on COLA numbers until an official announcement is made in October.

A more generous COLA isn't necessarily great

If you collect Social Security, you may be hoping for a larger COLA in 2027 than what you received this year. Unfortunately, a more generous raise may not do you much good.

Social Security COLAs are meant to keep benefits' buying power from eroding. If you get a larger COLA, it will come at the cost of higher prices. There's no getting around that, since COLAs and inflation are linked. Worse yet, if there's a large Medicare Part B hike in 2027 like there was in 2026, any COLA that comes through next year could get whittled down.

That's why it's important to diversify your income outside of Social Security. If those benefits currently provide all your retirement income, you may want to consider returning to the workforce in some capacity. Not only could a paycheck give you more spending money, but it could also allow you to build an investment portfolio that generates income in the future so you can supplement your Social Security checks.

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