Social Security is one of the U.S.'s most important social programs, but a common complaint among recipients is how much it changes. One change that's appreciated, however, is the annual cost-of-living adjustment (COLA), which is meant to offset increases in prices.
The Social Security Administration (SSA) will announce the 2027 COLA on Oct. 14. We won't know exactly what it will be until then, but here's what retirees can expect based on current economic conditions.
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How the annual COLA is determined
The SSA sets the annual COLA by looking at changes in the CPI-W, an inflation metric that tracks changes in prices of goods and services such as housing, transportation, food, energy costs, and other relevant expenses.
It compares the CPI-W average from the third quarter of the current year to the previous year's Q3 average and sets the COLA as the percentage increase. For example, the CPI-W average in 2025 was 2.76% higher than in 2024, landing us at the 2.8% COLA for 2026.
If the current year's CPI-W average is the same as or less than the previous year's, there won't be a COLA in the upcoming year. It's uncommon, but it happened in 2010, 2011, and 2016. Luckily, benefits will never be reduced due to a decrease in the CPI-W average.
What can retirees expect?
Although we won't know the exact 2027 COLA until Oct. 14, all signs are pointing to an above-average increase next year. In July, the CPI-W increased 3.4%, and that trend is likely to continue in August and September, the other two months used in the COLA calculation.
Senior advocacy group The Senior Citizens League currently predicts a COLA of 3.6%. That would be the third-highest COLA in the past decade, and a whole percentage point higher than the 2.6% average COLA over the past 20 years. For perspective, here are the previous 10 COLAs:
- 2026: 2.8%
- 2025: 2.5%
- 2024: 3.2%
- 2023: 8.7%
- 2022: 5.9%
- 2021: 1.3%
- 2020: 1.6%
- 2019: 2.8%
- 2018: 2%
- 2017: 0.3%
The expected COLA is higher than average largely because of the rising energy costs amid the conflict in the Middle East. Overall energy prices (which carry significant weight in the CPI-W calculation) were up 14.7% year over year in July, led by a 39.1% jump in fuel oil prices.
Unfortunately, the COLA is retroactive rather than proactive, so even if it ends up in the mid-3% range, it won't help retirees fight the inflation they're facing now. Still, I'm sure retirees will appreciate the nice boost to benefits that they're likely to see beginning next year. The COLA kicks in on Jan. 1 of every year.
