The Brief
The Social Security Administration is expected to announce the 2027 COLA on Oct. 14.
AARP projects a 3.5% increase, which would raise the average retiree benefit by about $73 per month; other estimates range from 3.2% to 3.6%.
The COLA is designed to help benefits keep pace with inflation, giving retirees an early estimate to plan for rising costs such as groceries, energy, housing and health care.
Retirees can now mark their calendars.
Soon, the Social Security Administration is expected to announce the 2027 cost-of-living adjustment, or COLA.
When Social Security COLA update is expected
Big picture view
The final COLA is calculated from CPI-W readings for July, August and September and is scheduled to be announced on Oct. 14.
AARP projects a 3.5% COLA, its first forecast issued before the government publishes third quarter inflation figures.
If AARP’s estimates hold up, the average retired worker benefit, about $2,086 in July, would increase about $73 a month starting in January. Disabled workers and surviving spouses would see increases to their average payments as well.
The Committee for a Responsible Federal Budget projects a 3.2% COLA, citing the flat CPI-W movement in July. The Senior Citizens League estimates a 3.6% increase, noting that swings earlier in the year complicate forecasting.
AARP says COLA forecast can help map out budget
Why you should care
AARP officials say early guidance helps older adults plan around the rising cost of groceries, energy, housing and health care. However, some analysts caution that energy prices and other volatile categories could shift the final number.
What they’re saying
AARP Public Policy Institute Vice President Rich Johnson says many older Americans rely on Social Security for most of their income and the COLA forecast can be used to help them map out their finances for next year.
“Family budgets have been under increasing pressure because of rising prices,” Johnson said. “The sooner that we can give them reliable information as to how much their benefits might [increase next year], the sooner they can start planning.”
CPI rose 3.4% in July
The backstory
The broader Consumer Price Index rose 3.4% in July from a year earlier, down from 3.5% in June, according to the Bureau of Labor Statistics. The CPI-W, the index used to calculate Social Security COLAs, also rose 3.4% over the year and was unchanged from June on a monthly, non-seasonally adjusted basis.
The CPI excluding food and energy (“core CPI”) rose 2.5% over the year, down from 2.6% in June. While inflation eased, both readings remained above 2%. The Federal Reserve formally targets 2% inflation as measured by a separate index, the personal consumption expenditures price index.
What is Social Security COLA?
Dig deeper
A Social Security COLA is an annual adjustment to Social Security and Supplemental Security Income benefits intended to help them keep pace with inflation.
RELATED: New Social Security COLA estimates released after fresh inflation data
Social Security COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks monthly changes in the cost of goods and services such as food, energy and medical care.
The Social Security Administration compares the average CPI-W for July, August and September with the average for the same period in the prior year. If the index rises, the percentage increase, rounded to the nearest tenth of a percentage point, becomes the COLA for the following year.
The Source
The information for this story was provided by previous FOX Local reporting. This story was reported from Los Angeles. Jason Gunn contributed.
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