What Current Inflation Hints About Social Security's 2027 COLA
Key Points
The annual COLA is set by examining year-over-year changes in the CPI-W from the third quarter.
July's CPI-W number was up 3.4% year over year, and providing an initial clue.
Predictions suggest that 2027's COLA could be among the largest in the past decade.
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We're less than two months away from one of Social Security's most anticipated days: the announcement of the 2027 cost-of-living adjustment (COLA). On Oct. 14, Social Security recipients will learn how much of a boost they can expect to their benefits beginning on Jan. 1, 2027.
Although the official COLA won't be out until then, recent inflation numbers hint at its direction. Unfortunately, the 2027 COLA won't help with the inflation htat retirees are currently facing, but the (somewhat) good news is that they're likely to receive an above-average boost next year.
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How the annual COLA is calculated
The U.S.'s main inflation metric is the CPI-U, but to determine the annual COLA, the Social Security Administration (SSA) looks at changes in the CPI-W. The main difference is that the CPI-W includes only households where more than half the income comes from hourly wage work, and it represents 30% of the total U.S. population. The SSA uses a three-step process to set the COLA:
- Average CPI-W numbers for the third quarter of the current year (July, August, September).
- Compare the current year's CPI-W average to the previous year's average.
- Set the COLA as the percentage increase, rounded to the nearest tenth of a percentage. If the average is the same as or less than the previous year's, there is no COLA for the upcoming year, but benefits are not reduced.
What current inflation hints about the 2027 COLA
July's inflation data was the first that would be considered for the upcoming COLA. During the month, the CPI-W came in 3.4% higher than last year. Here is how much some major expenditure groups used in CPI-W calculations increased year over year:
| Expenditure Group | Year-Over-Year Increase |
|---|---|
| Gasoline | 24.6% |
| Transportation | 5.8% |
| Hospital Services | 5.2% |
| Housing | 3.3% |
| Food | 3% |
Data source: The Bureau of Labor Statistics' July 2026 Consumer Price Index report.
These are just a few of the categories used to determine the CPI-W, but they highlight how overall inflation has increased since this time last year (the CPI-U was also up 3.4% year over year).
What can retirees expect for 2027's COLA?
Again, nothing will be set in stone until the CPI-W data for August and September is released. However, there's a very good chance that retirees will receive an above-average COLA, especially at the current pace of inflation and given current geopolitical events and tariff battles.
The Senior Citizens League, a senior advocacy group that produces COLA estimates, currently projects a 2027 COLA of 3.6%. It's lower than the 3.8% it had previously predicted, but that would still make it the third-largest COLA in the past decade.
If you're currently receiving Social Security benefits, be sure to mark your calendar for Oct. 14, so you can get a jump-start on planning your 2027 finances after finding out how much your benefits will increase.
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