When the Social Security Administration (SSA) announced that retirees on Social Security would be getting a 2.8% cost-of-living adjustment (COLA) in 2026, a lot of people weren’t happy. Many assumed a boost that size would be inadequate. And while they couldn’t have known it at the time, they were right.
In the wake of the Iran war, inflation has surged. May’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.4% on an annual basis. That’s significant, because the CPI-W is the measure used to calculate Social Security COLAs. If benefits only rose 2.8% this year and inflation is already in the 4% range, it doesn’t bode well.
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The silver lining, though, is that elevated inflation could set the stage for a much larger raise for Social Security recipients in 2027. And so far, estimates are pointing to a far more substantial increase.
What the experts say about next year’s Social Security COLA
May’s CPI-W does not determine what raise Social Security recipients will get in the new year. That’s because COLAs are based specifically on third-quarter CPI-W readings. However, current inflation data can provide clues.
The Senior Citizens League, an advocacy group, is now predicting a 3.8% Social Security COLA in the new year. Meanwhile, independent Social Security analyst Mary Johnson raised her 2027 COLA forecast to 4.7% in June.
Notably, Johnson had estimated a 4.2% raise in May, so that increase is significant. Johnson also pointed out that her 4.7% estimate could rise if inflation continues to run hot.
If Johnson’s estimates are correct, seniors on Social Security could be in line for their largest COLA in years. And even if the number ends up being closer to the Senior Citizens League’s estimate, it could still mark the largest COLA since 2023.
Should retirees hope for a larger Social Security COLA?
It’s natural for seniors to want a more generous Social Security COLA. But one thing all beneficiaries should keep in mind is that when COLAs are significant, it comes at the cost of higher prices.
A larger 2027 COLA might sound nice on paper. But for that to happen, inflation will need to remain elevated through the summer months. That could strain many Social Security recipients in the near term, especially given the smaller raise that came through this year.
It’s important for seniors to recognize that Social Security COLAs aren’t meant to help them get ahead financially. The best a COLA can typically do is make it possible to keep up with rising costs. Recognizing that might change the way retirees think about COLAs so that smaller raises don’t end up being such a disappointment. But based on recent numbers, a smaller COLA is looking less and less likely for 2027.
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Will Social Security Recipients Get a History-Making COLA in 2027? Here’s What the Experts Say. was originally published by The Motley Fool
