Social Security retirees in the US are expected to get a 3.8% cost-of-living adjustment (COLA) in 2027, according to the latest projection by The Senior Citizens’ League’s COLA Watch. If the projection becomes official, the average monthly Social Security retirement benefit would increase by about $77, taking it from roughly $2,026 to $2,103.41 per month.
Social Security retirees could receive a $77 monthly COLA increase in 2027 (REUTERS)
Despite the increase, retirees would still receive about $597 less each month than the estimated average monthly living expenses of an older American, which are around $2,700. The projection has renewed calls from senior advocacy groups for changes in the way Social Security annual increases are calculated.
The Senior Citizens’ League is urging Congress and the US president to increase Social Security benefits so older Americans can better afford basic living costs. The group said lawmakers should also replace the current formula used to calculate annual COLA increases because it believes the existing system does not reflect retirees’ real expenses.
How Social Security COLA is calculated today
Every year, Social Security benefits are adjusted through the Cost-of-Living Adjustment (COLA), which helps benefits keep up with inflation, as explained by Yahoo Finance. The current COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is prepared by the US Bureau of Labor Statistics (BLS). The CPI-W measures price changes for a fixed basket of goods and services, including food, housing, clothing, transportation and other everyday expenses.
Each autumn, the Social Security Administration compares the average CPI-W reading from July, August and September with the same three months a year earlier. If the CPI-W rises, Social Security benefits increase by the same percentage starting the following January. If inflation does not increase or prices fall, Social Security payments do not decrease—they simply remain the same.
Why experts say the current formula is not enough
The Senior Citizens’ League wants the government to switch from CPI-W to another inflation measure called the Consumer Price Index for the Elderly (CPI-E). The CPI-E was introduced by the Bureau of Labor Statistics in 1987 as an experimental measure designed to track inflation based on the spending habits of older Americans. Unlike CPI-W, CPI-E focuses on how retirees actually spend their money instead of how working Americans spend theirs.
The CPI-E uses the same price data collected by the government but gives different importance to spending categories based on retirees’ budgets. Housing costs, healthcare spending and other expenses that matter more to seniors receive greater weight under CPI-E.
Also read: No Social Security SSI payment in August 2026? Here’s why millions won’t get a check
Rich Johnson, vice president of financial security at the AARP Public Policy Institute, said the current system does not accurately reflect retirees’ spending. “The COLA has been sometimes viewed as inadequate, in that it does not reflect the spending patterns of Social Security beneficiaries,” Rich Johnson, vice president of financial security with the AARP Public Policy Institute, told Yahoo News.
Johnson explained that older Americans generally spend more on housing and medical care than younger workers, while spending less on transportation, food, beverages and clothing.
“People 62 and older spend more on housing and medical care, for example, and less on transportation, food and beverages, and apparel,” he added. “Social Security beneficiaries are 62 or older (except for some receiving disability benefits), and are older than most urban wage earners and clerical workers.”
How CPI-E could increase Social Security benefits
Because CPI-E gives more importance to categories like healthcare and housing, it generally rises faster than CPI-W when those costs increase. Johnson said a COLA based on CPI-E would have produced higher annual increases in most years over the past four decades.
“If the Social Security COLA had been based on the CPI-E instead of the CPI-W, the COLA would have been higher every year during the 40-year period from 1986 to 2025 except for eight years,” the AARP expert said.
Johnson noted that the yearly difference between CPI-E and CPI-W is usually small—about 0.2 percentage points on average—but those differences build up over many years. He said retirees who started collecting benefits in 1986 would have received significantly larger monthly payments by 2025 if CPI-E had been used all along.
“If a COLA based on the CPI-E had gone into effect in 1986, the 2025 Social Security benefit for someone who began collecting in 1986 would have been 8.1 percent higher than under the actual COLA that occurred in those years,” he added, according to Yahoo Finance.
Why the government has not switched to CPI-E
Even though CPI-E was introduced nearly 40 years ago, it is still officially considered an experimental index by the Bureau of Labor Statistics. Johnson said the experimental nature of the index is one of the main reasons it has not replaced the current formula. “One reason this index has not been adopted is that it is considered experimental,” Johnson said via Yahoo News.
CPI-E is based on a much smaller survey sample—about one-third the size of the survey used for CPI-W—which could make it more vulnerable to statistical errors. The index also assumes retirees shop in the same stores and live in similar locations as working-age Americans, something critics say may not accurately reflect seniors’ spending patterns.
According to the Congressional Budget Office, CPI-E gives housing a 49.1% weight compared with 42.7% under CPI-W, but many retirees have already paid off their mortgages, meaning housing may not always represent such a large share of their expenses, according to the report by Yahoo Finance.
Advocates say seniors still need larger benefit increases
The Senior Citizens’ League says rising inflation is making it increasingly difficult for older Americans to cover basic living expenses. Executive Director Shannon Benton said many seniors are already struggling to afford essential healthcare because of rising costs.
“We’re seeing inflation on the rise when more than half of seniors already can’t afford basic living standards,” Executive Director Shannon Benton of The Senior Citizens’ League Shannon Benton said in June. “Many seniors already have to skip doctors’ appointments due to costs, which costs all of us more in the long run when we swap preventive care for emergency care,” via Yahoo Finance.
Benton said that even though a projected 3.8% COLA is higher than last year’s 2.8% increase, it still would not fully close the gap between retirees’ income and their living costs.”A 3.8 percent COLA might sound like a lot compared to last year’s 2.8 percent, but it won’t be enough to make up the difference between what seniors bring in and what they need to live with dignity.”
