Carl Smith | F Stop | Getty Images
Social Security benefits are typically adjusted annually for inflation.
COLAs for Social Security recipients hit record highs in 2022 and 2023, with annual growth rates rising to 5.9% and 8.7%, respectively. However, as the pace of inflation subsided, so did the annual COLA increases.
The cost of living adjustment for 2026 was 2.8%. This resulted in an average increase of about $56 per month for retirees, with higher Medicare premiums offsetting that increase for some beneficiaries.
Now, new government inflation data in January suggests that the cost of living adjustment could be even lower in 2027 if the pace of inflation remains the same in coming months.
According to the Social Security Administration, the 2026 COLA will affect approximately 75 million beneficiaries.
Estimated range is 1.2% to 3.1%
Mary Johnson, an independent Social Security and Medicare analyst, predicts that the Social Security cost of living adjustment could be just 1.2% in 2027. If this increase goes into effect, it would be the lowest COLA since the 0.3% benefit increase in 2017.
Separately, the Alliance on Senior Citizens, a nonpartisan seniors organization, currently projects Social Security COLAs of 2.8% in 2027, which is in line with the benefit increases that beneficiaries will see this year.
Meanwhile, the Congressional Budget Office projects the Social Security COLA will be 3.1% next year and 2.5% the following year as part of its estimate of the program’s future costs.
Declining COLA will ‘exacerbate’ economic stress
If the COLA were to fall to 2.8%, “this small number would only exacerbate financial stress for seniors,” the Federation of Senior Citizens said. The group’s poll found that more than half of seniors (about 58%) have skipped at least one health care product or service in the past 12 months to cut costs.
Another AARP study in September found a 3% COLA to be “insufficient.”
The group asked around 1,000 adults aged 50 and over what they thought about the then-estimated 3% rise in prices and found that 77% of respondents said it was not enough to keep up with rising prices. Most respondents (72%) said the ideal benefit increase would be 5% or more.
To be sure, current COLA forecasts are preliminary and subject to change.
The Social Security Cost of Living Adjustment is calculated annually using third-quarter Consumer Price Index for Urban Wage and Office Workers (CPI-W) data. CPI-W data for the third quarter of this year is compared to the third quarter of last year. The percentage increase (if any) from one year to the next determines the COLA.
According to new CPI data for January, the CPI-W rose 2.2% over the past 12 months.
