Retirees hoping to put more money into their wallets might cheer the latest prediction about next year’s Social Security cost-of-living adjustment (COLA).
The Senior Citizens League projects that the COLA for 2027 will be 3.6%. That is a large increase over the 2.8% COLA for 2026.
While seniors whose retirement savings are stretched thin undoubtedly would prefer a boost in benefits, it’s important to remember that this is just a projection of what the COLA might be.
In addition, a larger COLA is not necessarily unalloyed good news.
How the government calculates the annual COLA
Social Security COLAs date back to 1973. Since that time, the Social Security Administration (SSA) has made annual cost-of-living adjustments to beneficiaries’ checks to help benefits keep pace with inflation.
The government directly ties its COLA to increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics (BLS) calculates a new CPI-W each month.
In calculating the official COLA, the SSA compares the CPI-W from the third quarter — July, August, and September — of the current year to the third quarter of the previous year.
Higher inflation results in larger COLAs. When prices are well under control, COLAs are small. There have even been years when price growth has been so modest that there has not been any type of COLA at all.
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How much would a 3.6% Social Security COLA boost benefits?
The bigger your monthly Social Security payout is, the more you would benefit from a 3.6% boost.
Currently, the average recipient earns around $2,086 as of July 2026. A 3.6% COLA would add roughly $75 to their benefit, bringing the monthly total to around $2,161.
The few recipients who receive the monthly maximum in Social Security benefits of $5,181 would see their payout jump by around $187 a month, bringing their monthly income to about $5,368.
Why you should not count on the projected numbers
It would be foolish to put too much stock in the numbers above, however.
Officially, we will not know what the real COLA is until the SSA makes an announcement on Oct. 14.
The final number will depend on how much inflation we have between now and the autumn. Crucially, inflation has begun to subside.
In fact, The Senior Citizens League’s recent 3.6% COLA projection is down from the 3.8% it predicted last month.
AARP is also predicting a lower COLA than it had forecast earlier. Its latest projection is 3.5%, down from an earlier guess of 3.6%.
Who would benefit most from a larger COLA
A COLA would increase the monthly payout of everyone on Social Security. But very few would see the maximum payout.
Almost no one qualifies for the top Social Security payout. To do so, you have to earn at or above the taxable maximum for 35 years and delay filing for benefits until age 70. That is a high bar that few meet.
Many more retirees are likely to get the average increase or less, whatever that bump turns out to be.
Is a higher COLA really a good thing?
One of the biggest myths surrounding the Social Security program is that a larger COLA is a good thing that comes with no downside.
In fact, COLAs do not grow large unless prices also go up. And many retirees find that a bigger COLA does not keep up with the higher costs that inflation brings to most aspects of their financial lives.
For example, it is not unusual for retirees to use much of a COLA increase simply to cover the cost of higher Medicare Part B premiums.
Critics have also argued that the index used to calculate the COLA — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — understates seniors’ actual costs.
How you should react to a higher COLA
Unfortunately, higher Medicare premiums and rising costs in many goods and services likely will quickly wipe out most or all of any benefit you receive from a higher COLA.
That means that in reality, it is unlikely that you will have any extra money to play with despite getting a COLA next year.
So, it might make sense to simply ignore the higher COLA and to continue to find ways to trim costs or increase your income so your budget looks healthier in 2027.
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Bottom line
It looks like next year’s COLA will exceed the increase we saw in 2026. However, any numbers you see right now are merely projections. So, don’t bank on them too heavily.
Instead, watch the coming inflation reports and the official announcement in October.
In the meantime, focus on things you can control: Look for bills to cut if money feels tight and consider part-time work or a side hustle if you need to boost your bottom line.
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Author Details
Chris Lewis, CEPF
Chris Lewis has spent his career turning data into answers. As the Head of Research at FinanceBuzz and a Certified Educator in Personal Finance, he oversees the data journalism and media relations teams, digging into the personal finance topics that shape Americans’ lives at every stage, from Social Security and retirement income to 401(k) strategies, jobs, and real estate.
