Social Security Retirees Are Looking at the Fourth Highest COLA In 36 Years

When the Social Security Administration (SSA) announced last year that benefits would be getting a 2.8% cost-of-living adjustment, or COLA, for 2026, many retirees were disappointed. But next year’s raise is shaping up to be a lot more substantial.

A bout of elevated inflation has reset 2027’s COLA forecast. And if one expert is correct, Social Security recipients could be in line for their fourth-highest raise in 36 years.

What the current COLA projection looks like

In May, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 4.4% on an annual basis. The CPI-W is the index used to calculate Social Security COLAs.

Following that reading, Mary Johnson, a seasoned independent Social Security analyst, increased her 2027 COLA forecast to 4.7%. That’s a big jump from Johnson’s 4.2% projection a month prior.

If Social Security’s 2027 COLA does end up coming in at 4.7%, it would be the fourth-highest raise announced in 36 years. Only these COLAs came in higher:

• 7% announced in 2022
• 9% announced in 2021
• 8% announced in 2008

A larger Social Security COLA isn’t necessarily a good thing

A 4.7% COLA might seem like something to celebrate. But it actually signals a less favorable economic reality for retirees on fixed incomes.

The purpose of Social Security COLAs is to help seniors who collect benefits keep up with rising costs. When prices for everyday goods increase, benefits are adjusted upward to preserve Social Security recipients’ buying power.

The only way for Social Security COLAs to be well above average is for inflation to run hot. That’s what’s been happening in the wake of the Middle East crisis.

Soaring oil prices are not only hurting consumers at the pump, but across the broad economy. When it costs more to transport goods, the cost of just about everything has the potential to go up.

For Social Security benefits to actually get a 4.7% increase in the new year, inflation will need to remain elevated through September. But if that happens, it could put a huge strain on retirees in the near term — especially given that this year’s 2.8% COLA is set in stone and has, in recent months, trailed inflation quite significantly.

It’s too soon to know what 2027’s COLA will be

Since Social Security COLAs are based specifically on CPI-W readings from July, August, and September, Johnson’s 4.7% projection is hardly set in stone. The SSA typically makes its official COLA announcement in October. And there’s a lot of data that needs to come in between now and then to arrive at the right number.

Seniors on Social Security may be in for a larger raise in the new year. But even if 2027’s COLA is history-making, it won’t necessarily be something for seniors to celebrate.

At the end of the day, retirees need to realize that there’s no way to decouple higher prices and higher COLAs. They can wish for the latter all they want, but a more generous Social Security raise is pretty much always going to come at the expense of financial strain along the way.