Many seniors on Social Security are struggling to make ends meet as living costs soar. If you’re one of them, you may be wondering what to expect out of next year’s Social Security COLA, or cost-of-living adjustment.
Initial estimates are calling for a larger Social Security COLA in 2027 than in 2026. But that doesn’t mean you should start gearing up for bigger monthly checks.
Key Social Security COLA data is still missing
Current estimates are pointing to a more generous Social Security COLA in the new year. The nonpartisan Senior Citizens League projects that next year’s COLA could be 3.8%. Mary Johnson, a well-respected independent Social Security analyst, says next year’s COLA could be 3.7%.
It’s important to know that Social Security COLAs are based on inflation readings during the months of July, August, and September. The Social Security Administration (SSA) won’t have all of that data until mid-October, so any number you see in the interim is speculation (albeit educated speculation based on data).
Why 2027’s COLA could still come in lower
Based on the way inflation has trended this year, the ongoing conflict in the Middle East, and current fuel prices, you might assume that a larger Social Security COLA in 2027 is a given. But it’s important to realize that a lot could happen in the next couple of months.
If prices suddenly start plummeting, it could result in a smaller raise than this year’s COLA, which came in at 2.8%. And while that scenario is unlikely, it is possible.
It’s also important to recognize that even if next year’s Social Security COLA is well above the 2.8% raise that came in this year, the cost of Medicare will help dictate how much of that increase seniors get to keep.
Seniors who are enrolled in both Social Security and Medicare have their Part B premiums deducted from their monthly benefits automatically. If the cost of Medicare Part B increases substantially in 2027 like it did this year, next year’s net raise for retirees could be modest, even if the COLA itself is generous.
It’s best not to bank on COLAs to improve your finances
While next year’s Social Security COLA is likely to be higher than 2.8%, that’s not a given. And it’s also best not to plan on any specific COLA until the SSA makes an official announcement and until the cost of Medicare Part B is revealed.
But even once you have all of that information, do recognize that Social Security COLAs are designed to help seniors keep up with rising costs. They’re not designed to help improve your financial picture on a whole. Plus, COLAs often fail to help seniors keep pace with inflation, despite being designed to do so.
If you want to give your finances a boost, it pays to look at ways to generate more income on your own. That could mean renting out a portion of your home, consulting in your former field, starting a business, or taking a part-time job.
If you have savings, make sure that money is invested in a way that puts income in your pocket, too. It’s okay to keep a portion of your nest egg in cash. But make certain you’re also getting regular paychecks via bond interest and dividends. These are important steps to take no matter what sort of Social Security COLA might be in store.
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