Social Security has been in the news all year. We can thank the program’s pending financial shortfall and potential benefit cuts for all that press. But more recently, the news on Social Security has been all about the 2027 COLA, or cost-of-living adjustment. Social Security benefits are eligible to receive a COLA each year. The logic? Those benefits are payable throughout retirement, which, for some people, can last 30 years or more. If benefits didn’t get an inflation adjustment, they’d lose value over time.
Case in point: A $1,000 item purchased back in 2000 would cost $1,945 today. A Social Security benefit issued in 2000 wouldn’t be able to maintain the same level of purchasing power, which is why COLAs exist. Of course, COLAs weren’t always automatic like they are today. It used to be that lawmakers would have to vote in inflation adjustments. The process today is much less cumbersome. Social Security COLAs are pegged to third quarter changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When there’s an increase in the CPI-W, Social Security gets a boost in line with that increase.
Now if you’ve been paying attention to what things cost this year, you’re probably well aware that prices are up. That means Social Security benefits will most likely enjoy a generous boost in the new year. Here are a few things to expect from the COLA announcement on October 14 and the actual raise you receive in January.
Read: These past three months are the key to the Social Security COLA
A larger boost than in 2026
The 2026 COLA came in at 2.8% this past January. Based on inflation readings to date, the 2027 COLA is expected to land in the 3.5% to 3.6% range.
Now for context, since 2010, there have only been four COLAs to surpass the 3% mark:
- 2012’s COLA was 3.6%
- 2022’s COLA was 5.9%
- 2023’s COLA was 8.7%
- 2024’s COLA was 3.2%
So a COLA above 3% is pretty huge. But don’t get too excited just yet.
Modest help beating inflation
While Social Security may be in line for one its biggest COLAs in recent history, that doesn’t mean the upcoming raise will actually keep up with inflation. If trends tell us anything, it’s that Social Security COLAs tend to fall short in that regard. The nonpartisan Senior Citizens League reports that Social Security benefits have lost 13.7% of their buying power over the past decade. Is that intentional? Maybe.
The more Social Security has to pay out in COLAs, the more the program’s limited financial resources are strained. Congress clearly hasn’t been too motivated to address the issue of insufficient COLAs given that preventing benefit cuts is a more pressing issue. But the reason Social Security’s COLAs haven’t stood up to real-world inflation boils down to how they’re calculated. Remember how we talked about the CPI-W? It’s a great measure of the cost increases wage earners face. For retirees, not so much.
If you’re 72 and don’t work, you probably spend differently than your 45-year-old son who goes to work every day. Advocates have long pushed to have Social Security COLAs based on an index that measures retiree expenses. But Congress hasn’t acted.
A limited impact on finances broadly
If you’re on Social Security, you may be excited by the idea of a significant COLA. Don’t be.
First, large COLAs always come at the expense of higher price increases. So yes, your Social Security checks might go up a bit. But the extra $70 or $80 you receive will probably be spent paying for higher-priced gas, groceries, and medications. That’s hardly a win.
Also, remember that Social Security COLAs are meant to match inflation at best. Think of your upcoming increase as a means of reimbursing yourself for the higher costs you incurred for much of 2026. To put it another way, don’t expect your upcoming COLA to make a big positive mark on your finances. You might get a little more breathing room covering essentials. That’s about it.
And also, don’t forget that if you’re on Medicare, a big Part B hike could chip away at a good chunk of your upcoming COLA. Medicare probably won’t announce a standard Part B premium for a number of weeks after the COLA announcement. So prepare for another guessing game even once the Social Security Administration sheds light on next year’s increase.
The news drops October 14
October 14 is when the Social Security Administration should make its 2027 COLA official, assuming there’s no holdup like there was last year thanks to the government shutdown. It’s a good day to tune in for news on your upcoming raise, which may be a less stressful event now that you know what to expect.
