Social Security's annual cost-of-living adjustments (COLAs) are extremely important to retirees. Those COLAs allow benefits to increase in line with inflation, which is crucial considering that many retirees collect Social Security for decades.
This year, Social Security benefits received a 2.8% COLA, but many seniors are hoping for a larger raise in 2027. And at one point, a much larger boost did seem likely.
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In June, following a rise in inflation, independent Social Security analyst Mary Johnson projected that the 2027 COLA would be 4.7%. But she's since lowered her forecast significantly, as have other experts.
That doesn't necessarily mean that a 4% COLA is off the table, though.
Why a 4% COLA may still be in play
Social Security COLAs are based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). As of this writing, we have CPI-W data for July, but not August or September (though August's reading should arrive very shortly).
If it turns out inflation picked up a lot in August, and if inflation surges in September, Social Security recipients could potentially be in for a 4% COLA in 2027. But to be clear, inflation would really have to increase significantly for that to happen, which isn't necessarily a win for seniors because of the near-term strain it's apt to cause.
The COLA retirees may want to plan for instead
Johnson's current Social Security COLA estimate for 2027 is 3.4%. The Senior Citizens League, an advocacy group, projects that next year's COLA will be 3.6%, which isn't so far off.
As such, seniors may want to prepare for a COLA in the mid-3% range, as opposed to hope for one that's much larger. A 3.4% COLA -- the lower of the estimates above -- would still be a lot bigger than 2026's raise.
It's also important to recognize that the value of the upcoming COLA for many seniors will hinge on how much Medicare Part B rises in the new year.
Seniors who are on Medicare and Social Security at the same time pay for Part B out of their monthly benefits. So even if next year's COLA is a bit larger than what the current projections call for, a notable uptick in Part B's standard premium could eat into that increase significantly.
An official Social Security COLA should be announced on Oct 14. But the details on Medicare may not be available until the following month, unfortunately.
