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The Social Security cost-of-living adjustment for 2027 may be 3.4% to 3.6%, according to new estimates based on government inflation data released on Wednesday.
The Social Security cost-of-living adjustment, or COLA, is an annual adjustment that helps Social Security and Supplemental Security Income benefits keep pace with inflation. The Social Security Administration typically announces the official COLA for the upcoming year in October.
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New July CPI data released on Wednesday points to a 3.4% Social Security COLA for 2027, estimates Mary Johnson, an independent Social Security and Medicare policy analyst. In comparison, Johnson had estimated last month the 2027 COLA could be 3.7%, down from her 4.7% June forecast amid climbing inflation.
“A moderation in inflation has resulted in bringing down my estimate from higher peaks earlier this year,” Johnson said in a statement.
The new estimate is still higher than the long-term average Social Security cost-of-living adjustment of around 2.6%, she said. In the past decade, the COLA has averaged 3.1%, the Social Security Administration said in October, as spikes in inflation prompted above-average benefit increases of 5.9% in 2022 and 8.7% in 2023.
Meanwhile, the Senior Citizens League now estimates the 2027 Social Security COLA may be 3.6%. The nonpartisan senior group had previously forecast a 3.8% COLA in both June and July.
How the Social Security COLA is calculated
The Social Security cost-of-living adjustment is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. Data released on Wednesday shows the CPI-W rose 3.4% over the last 12 months as of July.
The broader consumer price index was up 3.4% over the past 12 months as of July, as consumer prices moderated.
To be sure, the latest Social Security COLA estimates are preliminary and subject to change.
How inflation fares over the next two months will help determine the official size of the 2027 COLA.
The Social Security COLA is calculated by comparing the current year’s third quarter inflation data for the months of July, August and September to the previous year’s third quarter data. The percentage increase of the average CPI-W for the third quarter from one year to the next determines the size of the COLA.
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