Carl Smith | Fstop | Getty Images
Social Security benefits are typically adjusted every year to keep up with rising prices.
Social Security beneficiaries saw record-high COLAs in 2022 and 2023, when the annual increases climbed to 5.9% and 8.7%, respectively. Yet as the pace of inflation subsided, the size of the annual COLA increase has also come down.
The 2026 cost-of-living adjustment was 2.8%. That added about $56 per month on average for retirees, and for some beneficiaries, higher Medicare premiums offset that increase.
Now, new government inflation data for January suggests the cost-of-living adjustment for 2027 may be even lower, if the pace of inflation stays the same in the coming months.
The 2026 COLA affects around 75 million beneficiaries, according to the Social Security Administration.
Estimates range from 1.2% to 3.1%
The Social Security cost-of-living adjustment may be just 1.2% in 2027, estimates Mary Johnson, an independent Social Security and Medicare analyst. If that increase were to go into effect, it would be the lowest COLA since a 0.3% increase to benefits in 2017.
Separately, the Senior Citizens League, a nonpartisan senior group, now projects a 2.8% Social Security COLA for 2027, consistent with the benefit boost beneficiaries saw for this year.
Meanwhile, the Congressional Budget Office has forecast a 3.1% Social Security COLA for next year, followed by 2.5% the following year, as part of its estimates on the program’s future costs.
Low COLA would ‘exacerbate’ financial stress
If the COLA landed at 2.8%, “this paltry figure would only exacerbate seniors’ financial stress,” the Senior Citizens League states. The group’s polling has found more than half of seniors — almost 58% — have skipped at least one health care product or service in the past 12 months to cut costs.
A separate September AARP survey found that a 3% COLA is “insufficient.”
The organization asked about 1,000 adults ages 50 and older what they thought of a then-estimated 3% increase and found 77% of respondents said that was not enough to keep up with rising prices. Most respondents — 72% — said the ideal benefit boost would be 5% or higher.
To be sure, the current COLA projections are preliminary and subject to change.
The Social Security cost-of-living adjustment is calculated each year using third-quarter data for the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Third-quarter CPI-W data for the current year is compared to the third quarter of the previous year. The percentage increase from one year to the next, if there is one, determines the COLA.
New CPI data for January shows the CPI-W increased 2.2% over the previous 12 months.
