A 2027 Social Security COLA Rise May Not Help Retirees
Millions of Americans receiving Social Security benefits could see a larger cost-of-living adjustment (COLA) in 2027 thanks to rising inflation, but new analysis suggests that bigger benefit checks may still fail to restore the buying power retirees have lost over the past decade.
Social Security beneficiaries receive an annual COLA designed to help benefits keep pace with inflation. More than 70 million Americans rely on Social Security retirement, disability or survivor benefits, making it the country’s largest safety net program.
Although the official 2027 COLA will not be announced until October, analysts have already raised their projections in light of recent strong inflation readings.
Early estimates now project next year’s COLA could exceed this year’s 2.8 percent increase, driven by higher energy, fuel and grocery prices. But a report from The Senior Citizens League (TSCL) argues that even repeated annual adjustments have not kept pace with the real costs older Americans face.
Inflation Pushes COLA Forecasts Higher
TSCL estimates the 2027 increase could reach 3.9 percent, while independent Social Security analyst Mary Johnson has projected a 4.2 percent adjustment.
Inflation, measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rose sharply in recent months after a slower start to the year. The CPI-W is the formula used to calculate Social Security COLAs.
According to the latest data, CPI-W inflation measured 2.2 percent in January and February, then climbed to 3.3 percent in March as energy prices rose amid the Iran war. Annual inflation then rose to 3.8 percent in April, its highest level in three years, with energy, housing and food costs contributing to the increase.
The SSA determines the annual COLA by comparing average CPI-W readings from July, August and September with the same period a year earlier. Because those third-quarter figures are not yet available, analyst forecasts are revised throughout the year as new inflation reports are released.
Report Says Benefits Have Lost Buying Power
Despite expectations of a larger COLA next year, TSCL’S research shows benefits have lost value, and a higher COLA for next year won’t necessarily provide any meaningful relief.
The group estimates in its Social Security’s Loss of Buying Power 2026 report that benefits lost about 13.7 percent of their purchasing power between 2016 and 2026, meaning retirees are effectively receiving “about 86 cents on the dollar” compared with a decade ago.
According to the report, benefits would need to increase by 15.8 percent, or $295.85 per month for the average beneficiary, this year to restore the same buying power retirees had in 2016.
To calculate the estimate, TSCL created its own price index based on 70 commonly used goods and services. It focused specifically on the spending patterns of seniors living on limited incomes and searching for the cheapest available options.
“Since most seniors live on less than $2,000 per month and 39 percent depend on Social Security for all of their income,” the report said, the study was designed to reflect “their economic experience.”
TSCL found that prices for seniors trying to shop as affordably as possible climbed 43.55 percent over the past decade, compared with a 37.60 percent rise in CPI-W over the same period.
“This study shows that what seniors have been telling us about COLAs all this time is likely true: They aren’t keeping up,” the report reads.
Calls for Changes to COLA Calculations
TSCL is urging lawmakers to change how COLAs are calculated. Currently, Social Security uses CPI-W, sometimes known as the “blue collar measure,” which tracks spending by urban wage earners and clerical workers. TSCL instead supports switching to the Consumer Price Index for the Elderly (CPI-E), which is designed to reflect the spending patterns of Americans aged 62 and older.
The organization said CPI-E generally rises faster than CPI-W because seniors spend a larger share of their income on healthcare and housing.
TSCL estimates that adopting CPI-E could add more than $12,000 in lifetime benefits for the average worker who stopped working and started claiming benefits in 2024.
The group is also calling for Congress to establish a guaranteed minimum 3 percent COLA each year.
TSCL argued that several years of zero-percent COLAs following the 2008 financial crisis significantly damaged retirees’ purchasing power. Social Security recipients received no increase in 2010, 2011 and 2016, despite continuing economic growth in some of those years.
According to the report, a guaranteed minimum increase could gradually help benefits recover lost value, especially for retirees who experienced repeated periods of weak inflation.
When Is the 2027 COLA Announcement?
Beneficiaries will have to wait until October for the official 2027 COLA announcement.