Retirees get a Social Security Cost of Living Adjustment in most years.
The 2027 COLA could be on track to be a larger raise.
While getting extra benefits is a good thing, there’s also some bad news.
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Social Security benefits are an important source of income for many reasons. One of the biggest is the protections built into the program that ensure benefits don’t lose buying power as a result of inflation. Specifically, in most years, retirees receive a Cost of Living Adjustment or COLA to account for rising prices.
In 2026, retirees received a 2.8% COLA, up from a 2.5% cost of living adjustment in 2025. Seniors are also on track to get another raise next year, starting in January. While we won’t know the specific amount of this upcoming COLA for a while, there is already some preliminary data available. Unfortunately, that preliminary data suggests that the 2027 COLA is shaping up to be a good news/bad news scenario.
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The official COLA announcement for 2027 will come in October of 2026 because that’s when the data will be available to determine how much benefits will go up.
The COLA is calculated based on year-over-year changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When CPI-W for the third quarter shows that the average prices of a basket of goods and services have increased compared with the prior year, retirees get a benefits bump equal to the percentage increase.
CPI-W data is released each month, so it’s possible to predict in advance what the COLA is likely to be for the upcoming year. The Senior Citizens League, a senior advocacy group, has already begun making predictions, estimating that the COLA is going to be 2.8% again. That would be the same raise as retirees received this year.
However, many experts believe that inflation is likely to surge in the coming months as a result of unrest in Iran and the impact that the conflict will have on oil prices. If that’s the case, the COLA would end up being higher than the Cost of Living Adjustment seniors got this year. And that’s definitely a good news/bad news scenario.
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For retirees, getting a COLA that’s larger than the one they received this year would mean that their monthly benefits increase by a larger amount.
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In recent years, COLAs totaled 5.9%, 8.7%, 3.2%, 2.5%, and 2.8%. Many retirees became used to bigger COLAs in the post-pandemic era, so a bigger raise would deliver the expected benefits bump and provide more money to spend. That’s the good news.
The bad news, however, is that COLAs are directly based on inflation. The COLA will be bigger only if inflation is higher. And inflation, on the whole, doesn’t tend to be a good thing for seniors.
Most retirees don’t depend solely on Social Security for their income because benefits don’t provide enough money to live on. Benefits replace only around 40% of pre-retirement income, which would mean you’d have to make major lifestyle changes. So, seniors need extra money from other sources — and those sources are likely to be affected by inflation too.
Seniors who have money in a 401(k) or a savings account obviously don’t have automatic inflation-adjustments applied to that money. When inflation is high, funds in those accounts often lose value, especially if the money is invested relatively conservatively. Seniors who are already retired can’t afford to take major risks, as they need to withdraw funds to pay their bills, so their ROI tends to be more limited.
So, the bad news is that while a big raise will mean more Social Security money coming, it could still mean less buying power for retirees in the end because of the impact of inflation on their other accounts.
Seniors need to plan for this, and should consider working with a financial advisor to help, especially if prices continue to rise due to the impact of high oil costs.
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