2027 Social Security COLA seen at 3.4% to 3.6% as inflation cools

Moderating inflation has trimmed the projected 2027 Social Security cost-of-living adjustment to between 3.4% and 3.6%, according to estimates from three forecasters tracking July CPI-W data.

"A moderation in inflation has resulted in bringing down my estimate from higher peaks earlier this year," said Mary Johnson, an independent Social Security and Medicare policy analyst.

Johnson's 3.4% projection is down from 3.7% last month and 4.7% in June. The Senior Citizens League, a nonpartisan senior advocacy group, now sees 3.6%, while AARP projects 3.5% — a level that would add about $73 a month to the average retired worker's benefit of $2,085.98.

The official figure, due in October, is calculated from third-quarter CPI-W readings for July, August and September. Any adjustment above the 2.8% COLA beneficiaries received in 2026 would mark a second straight year of above-average increases, though the trust fund's projected exhaustion in 2032 keeps long-term benefit levels in question.

CPI-W Rise of 3.4% Sets the 2027 Baseline

The CPI-W rose 3.4% over the 12 months through July, matching the broader consumer price index, which also climbed 3.4%. The COLA is derived by comparing the average CPI-W for the third quarter against the same period a year earlier; the percentage gain becomes the following year's adjustment. The adjustment is designed to help benefits keep pace with inflation, protecting the purchasing power of roughly 75 million beneficiaries expected to receive more than $1.6 trillion in payments this year. The estimates remain preliminary and subject to change based on August and September inflation data.

The current projections sit above the long-term average COLA of about 2.6% and the prior-decade average of 3.1%. Spikes in inflation produced outsized increases of 5.9% in 2022 and 8.7% in 2023, the Social Security Administration said in October.

Deon Strickland, a financial adviser and in-house economist at Scholar Advising, said he does not expect a dramatic shift before the final figure is set. "I don't think the numbers are going to move a lot," he told Newsweek. "The cost-of-living adjustment they saw last year is likely to be within a tenth of what they see this year."

The adjustment affects the roughly 71.3 million Americans who received Social Security benefits in July, including retired workers drawing an average $2,085.98 a month. Another 7.3 million received Supplemental Security Income, averaging $736.54, with some beneficiaries in both programs.

September payments are already scheduled, with Supplemental Security Income recipients paid on September 1 and the final Social Security payment issued on September 23, spread by birth date. The COLA, by contrast, applies to benefits beginning in January 2027, giving retirees a clearer view of next year's income as they plan budgets.

The COLA also arrives as Social Security faces renewed scrutiny over its finances. The latest Trustees report projects the Old-Age and Survivors Insurance Trust Fund will exhaust its reserves in the fourth quarter of 2032 without congressional action, after which incoming revenue would cover an estimated 78 percent of scheduled benefits. The Committee for a Responsible Federal Budget estimates a typical newly retired dual-income couple could lose nearly $17,000 a year beginning in 2033.

Beneficiaries should verify the final adjustment against the Social Security Administration's official announcement in October, as the current figures are projections based on preliminary inflation data.

This article is for informational purposes only and does not constitute professional or investment advice.