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Social Security recipients could see a smaller cost-of-living adjustment in 2027 after U.S. inflation cooled in July. The Senior Citizens League now expects a 3.6% increase, while AARP projects a 3.5% adjustment.
The Consumer Price Index rose 3.4% year over year in July, down from 3.5% in June, while core inflation eased to 2.5% from 2.6%.
COLA Estimates Fall
The Senior Citizens League lowered its 2027 COLA forecast to 3.6% from 3.8% a month earlier, while AARP lowered its estimate to 3.5% from 3.6%. Both groups released their updated estimates on Wednesday.
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The Senior Citizens League based its estimate on July’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which rose 3.4% year over year. The group expects a 3.6% increase to be the highest COLA in four years.
AARP’s 3.5% estimate is based on current inflation data, including CPI-W data and Federal Reserve Bank of Cleveland projections for August and September. AARP said the forecast could change as inflation trends develop.
The COLA is calculated using the CPI-W, which tracks the spending patterns of working households. However, the measure may not fully reflect expenses faced by older Americans, particularly housing and medical costs.
Inflation Data Draws Mixed Views
July’s inflation data drew different interpretations from economists. Former Federal Reserve economist Claudia Sahm said the data continued to support the view that inflation is moving in the right direction, while economist Peter Schiff called the report “misleading.”
Shelter was the biggest contributor to the monthly increase in consumer prices, while the energy index fell 1.5% and gasoline prices declined 2.9%. Food prices rose 0.1%, while airline fares increased 2.2% and medical care costs rose 0.4%.
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Official COLA Coming In October
The official 2027 COLA has not been determined. The Social Security Administration will announce the adjustment on Oct. 14 after September inflation data is released.
The government calculates the COLA using the average yearly change in CPI-W for July, August and September. The adjustment will take effect with Social Security payments received in January 2027.
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For the average retired worker, AARP estimates that a 3.5% COLA would add about $73 to the monthly benefit. The Senior Citizens League estimates a 3.6% increase would raise its average benefit figure by $69.75.
“Seniors don’t experience inflation as a percentage on a chart. They experience it at the grocery store, at the pharmacy, in their insurance premiums and when they pay the rent,” Senior Citizens League Executive Director Shannon Benton said.
Photo courtesy: Shutterstock/ zimmytws
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