Social Security's 2027 COLA Could Surpass This Year's by Far. But Is That a Good Thing? Here's the Truth.
Key Points
Estimates are currently calling for a 3.4% to 3.6% COLA.
Unless inflation cools drastically, next year's raise could come in much higher than this year's 2.8% boost.
A large COLA will come at the cost of higher prices in the near term.
- The $23,760 Social Security bonus most retirees completely overlook ›
If you're on Social Security, you may be itching to know what your 2027 cost-of-living adjustment, or COLA, will amount to. And the good news is that you don't have to wait too much longer to find out.
An official COLA should be announced on Oct. 14, which, at this point, isn't so far off. And once you have that number, you can start to narrow down a budget for 2027.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
If you've been following COLA news, you may be aware that current estimates are putting next year's Social Security raise a lot higher than this year's 2.8% increase. But whether that's a good thing is questionable.
A larger raise isn't automatically a win
Current estimates point to a 2027 Social Security COLA between 3.4% and 3.6%. Even the low end of that range would lead to a much larger boost than the 2.8% COLA that arrived this past January. Based on the average $2,086 benefit today, a 3.4% COLA adds about $71 to the typical monthly check.
But while you may be hoping for a generous Social Security COLA in 2027, the reality is that a giant boost might hurt you in the near term. That's because COLAs are pegged to third-quarter inflation.
For next year's COLA to be considerably higher than this year's, inflation will need to remain quite elevated this month. But that's not something to hope for.
After all, do you relish the idea of having to pay more for essentials like groceries? Would you rather spend extra money to fill up your car or replace clothing items? Probably not.
That's why Social Security COLAs are always a bit of a mixed bag. A giant raise typically sounds nice in theory. But in reality, any large COLA that comes through is spurred by an uptick in prices during the third quarter of the year, which means your current Social Security checks could get strained.
Understand the role of COLAs
It's natural to wish for a larger Social Security raise than a smaller one. But one thing you must understand is that the best COLAs can generally do is match inflation -- not beat it.
Social Security COLAs also aren't designed to help people's finances improve. If you're having a hard time making ends meet based on your current Social Security checks, even a generous raise in 2027 is unlikely to make a big dent. Getting a part-time job or reducing expenses to the greatest degree possible could be a lot more helpful to your situation.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
The Motley Fool has a disclosure policy.
Recommended Articles
