In most years, retirees get a Cost of Living Adjustment (COLA). The COLA is called a raise because it results in a retiree’s monthly benefits check getting bigger. The purpose of it is to make sure that Social Security benefits don’t lose all their value over time due to inflation. Since prices increase in most years, if Social Security benefits stayed the same without a COLA, then each year, benefits would buy a little less.
Many retirees rely on their COLA to help them make ends meet, especially since Social Security benefits only replace about 40% of income for seniors, and a substantial number of people with too little savings depend heavily on these benefits.
Unfortunately, the first look at next year’s Social Security raise is now available, and there’s reason for retirees to be concerned about what they see.
Early projections for the 2027 COLA are out from a senior advocacy group called the Senior Citizens League, and the news isn’t good. According to TSCL’s estimates, retirees are most likely going to see a 2.5% COLA in 2027.
This number should be a source of concern for seniors for two key reasons:
It’s a smaller raise than retirees received in 2026, and it’s smaller than most of the raises retirees have received in the post-pandemic era. It’s tied with the 2025 raise as the smallest since 2022, with other raises ranging from 2.8% this year to 3.2% in 2024, 5.9% in 2022, and 8.7% in 2023.
It shows inflation is persistently higher than the Federal Reserve’s benchmark 2.00% target.
Neither of these facts is good news for seniors, who may see the value of their savings continue to erode due to persistent high inflation while collecting one of the smallest Social Security raises in years.
Egoitz Bengoetxea Iguaran from Getty Images and JJ Gouin from Getty Images · Egoitz Bengoetxea Iguaran from Getty Images and JJ Gouin from Getty Images
Persistently high inflation is bad news for retirees for obvious reasons. Most seniors get their money from Social Security as well as from retirement investment accounts such as 401(k) plans or IRA plans. Most retirees tend to have pretty conservative investments due to the fact that they may need to withdraw money to live on and can’t take too many risks with it. As a result, their savings may lose ground when inflation is too high.
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Retirees have been dealing with years of this, and these early projections from the Senior Citizens League (which are based on January reports from the Bureau of Labor Statistics) suggest that this problem isn’t going away any time soon.
On top of that, retirees will likely get a lower raise from Social Security next year than they did this year and will have one of the two lowest raises since 2022. Of course, since the raises are directly tied to inflation, the upside is that this means inflation is cooling a bit compared to 2022 and 2023. But the downside is that many retirees count on extra money coming in their checks each year, and this COLA will provide less of it.
That might be fine if the raises did their job and actually helped seniors maintain their buying power, but there’s ample evidence that they don’t. The formula used to calculate them doesn’t accurately take into account how much of their income goes to expenses in categories where there are especially high rates of inflation. The result is that benefits have lost around 20% of buying power since 2010, according to the Senior Citizens League. A smaller 2027 COLA isn’t going to help that situation.
The good news is, retirees have lots of time for the COLA forecast to change, or to prepare if it doesn’t. A financial advisor can offer help to seniors in combining Social Security with distributions from savings in a way that helps them make ends meet while preserving their investment accounts for the future.
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