Inflation can be especially hard for retirees because many rely on fixed-income sources. That's why Social Security has an annual cost-of-living adjustment (COLA) that's designed to help offset the loss of purchasing power over time. It's far from perfect, but it's something.
The official COLA will be announced in the coming days, on Oct. 14, but different organizations release ongoing forecasts throughout the year. One is The Senior Citizens League (TSCL), which currently forecasts a 3.5% COLA for 2027. If that forecast turns out true, it'll be well above the typical boost. Let's take a deeper dive into why.
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How the annual COLA is determined
Beginning in 1975, Social Security began setting the annual COLA based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It's an inflation measure released by the Bureau of Labor Statistics that differs slightly from the go-to CPI-U inflation number because it focuses on hourly and clerical workers.
Before 1975, Congress had to decide when to increase benefits rather than relying on the CPI-W.
Calculating the COLA is a three-step process:
- Calculate the CPI-W average for the third quarter (July, August, and September) of the current year.
- Compare it to the average from the previous year's third quarter.
- Set the upcoming COLA as the percentage change, rounded up to the nearest tenth of a percent.
Although uncommon, if the CPI-W average for the current year is the same as or smaller than the previous year, there won't be a COLA for the upcoming year. That definitely won't be the case for 2027, but it has happened three times (2010, 2011, and 2016). Luckily, recipients don't have to worry about their benefits being reduced because of falling inflation.
How a 3.5% COLA compares to other COLAs
The average monthly benefit in August was just over $2,087, meaning a 3.5% bump would mean an average increase of $73.05. Although 3.5% might not seem like a huge boost, it would be one of the higher COLAs since 1975.
Over the past 10 years, only two COLAs have exceeded 3.5%. Over the past 30 years, four have. Since it became automatic in 1975, only 17 have. Below are the past 10:
| Year | COLA |
|---|---|
| 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% |
Source: Social Security Administration.
We won't know the official COLA until September's inflation data is released on Oct. 14, but you can be certain it will be one of the larger increases recipients have received in recent years.
