Social Security beneficiaries may receive a smaller cost-of-living adjustment in 2027 as inflation continues to moderate. New estimates following the latest government inflation data put next year’s COLA between 3.4% and 3.6%.
The estimates are lower than projections made earlier this year, reflecting a gradual cooling in inflation. However, the expected increase would still be above the long-term average Social Security COLA.
The Social Security Administration (SSA) is expected to announce the official 2027 COLA in October. Until then, beneficiaries will need to wait for additional inflation data from August and September before the final adjustment can be determined.
Estimates
Mary Johnson, an independent Social Security and Medicare policy analyst, now estimates the 2027 COLA could be 3.4%. Her projection has declined steadily as inflation readings have moderated.
Johnson previously estimated a 3.7% COLA in July, while her June projection was 4.7%. The latest estimate reflects the effect of slower price growth in recent months.
The Senior Citizens League has also lowered its projection. The nonpartisan organization now expects a 3.6% COLA, compared with its previous estimates of 3.8% in June and July.
AARP has projected a 3.5% COLA based on the latest inflation data. Under that scenario, the average retired worker’s monthly benefit would increase by about $73.
| Source | 2027 COLA Estimate |
|---|---|
| Mary Johnson | 3.4% |
| AARP | 3.5% |
| The Senior Citizens League | 3.6% |
These figures are estimates rather than official numbers. The final COLA will depend on the inflation data used in the statutory calculation.
Inflation
The latest Consumer Price Index data provides an important clue about where the 2027 COLA may be headed.
The Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, increased 3.4% over the 12 months ending in July. The broader Consumer Price Index also rose 3.4% over the same period.
For Social Security beneficiaries, the CPI-W figure is particularly important because it is the inflation measure used to determine the annual COLA.
The July reading suggests that inflation remains elevated compared with the Federal Reserve’s longer-term target, but price growth has eased from some of the higher levels seen during the previous inflation surge.
That moderation has caused analysts to reduce their COLA projections. If inflation continues to cool, the final Social Security adjustment could remain near the current range.
Calculation
Social Security’s COLA is based on the average CPI-W readings for July, August, and September. The government compares the average for those three months with the corresponding third-quarter average from the previous year.
The percentage increase between those averages determines the following year’s COLA.
This means the July inflation reading alone does not determine the 2027 adjustment. August and September data will also be included in the calculation.
The process can be viewed as a three-month measurement rather than a single inflation snapshot. Even if July points toward a particular COLA, changes in prices during the next two months could move the final figure higher or lower.
For that reason, current projections should be treated as preliminary.
History
The estimated 2027 increase would remain above the long-term average for Social Security COLAs. Johnson estimates the long-term average at about 2.6%, while the SSA has reported that the COLA has averaged 3.1% over the past decade.
Recent years have included several unusually large adjustments because of elevated inflation.
Social Security beneficiaries received a 5.9% COLA in 2022 and an 8.7% adjustment in 2023. The 8.7% increase was particularly large and reflected the sharp rise in consumer prices during that period.
As inflation moderated, annual adjustments moved lower. The current estimates for 2027 are consistent with that broader trend.
A COLA in the 3.4% to 3.6% range would therefore be higher than the long-term average but substantially below the unusually high adjustment received in 2023.
Benefits
The size of the COLA matters because millions of Americans rely on Social Security as a source of retirement income. Even a few percentage points can translate into a meaningful difference in monthly payments.
AARP’s 3.5% estimate would increase the average retired worker’s benefit by about $73 per month. The exact dollar increase will depend on each person’s current benefit.
For example, someone receiving a larger-than-average payment would generally receive a larger dollar adjustment, while someone with a smaller benefit would receive less.
The increase also needs to be considered alongside household expenses. A higher Social Security payment can help offset rising costs, but the actual effect depends on changes in healthcare, housing, food, utilities, and other expenses.
Outlook
The latest inflation report has pushed 2027 Social Security COLA estimates lower, with current projections ranging from 3.4% to 3.6%. AARP’s estimate sits between those figures at 3.5%.
Still, none of these estimates is final. The SSA will use the average CPI-W readings for July, August, and September to calculate the official adjustment.
The next two months of inflation data will therefore be important for Social Security beneficiaries. If inflation remains moderate, the final COLA could stay close to current forecasts. If prices accelerate, the adjustment could be different.
For now, a COLA in the mid-3% range appears to be the latest expectation, which would provide a larger-than-average increase while remaining well below the adjustments seen during the peak of recent inflation.
FAQs
What is the latest 2027 COLA estimate?
Current estimates range from 3.4% to 3.6%.
What does AARP estimate?
AARP projects a 3.5% COLA for 2027.
When will the COLA be official?
The SSA typically announces it in October.
What determines the 2027 COLA?
The average third-quarter CPI-W determines the COLA.
