If you work as a salaried employee, you may find yourself getting antsy toward the end of the year as you wait for news of an upcoming raise. The same tends to apply to seniors on Social Security.
But whereas workers might have to wait until December to learn what their upcoming raise will be, the Social Security Administration (SSA) typically announces COLAs in October. And the nice thing about that is that seniors get a chance to prepare their budgets for the new year.
But even though the SSA won’t be able to announce a COLA for another four months, current economic data can provide clues as to what seniors can expect.
On June 10, a major inflation report was released that contains key information about a possible 2027 COLA. But the news, unfortunately, isn’t great.
2027 COLA watch: what could be in store
Any COLA projections that are available today need to be taken with a grain of salt, since those Social Security raises are based specifically on third quarter inflation data.
That said, on June 10, the Bureau of Labor Statistics released its Consumer Price Index for May, which showed that inflation rose substantially during the month. As a result, the Senior Citizens League updated its 2027 Social Security COLA projection to 3.8%.
A 3.8% raise would be substantially higher than the 2.8% COLA seniors got in 2026. So on the surface, that estimate might seem like a positive thing. But there’s a big reason why it isn’t.
If the Senior Citizens League is already projecting a higher COLA for 2027, it means the group likely expects inflation to remain elevated for the rest of the year. That means this year’s 2.8% COLA may fall flat.
The important thing to understand about Social Security COLAs is that they do not help benefits beat inflation. COLAs are simply supposed to help benefits match inflation.
But COLAs are also calculated ahead of time. They’re not updated in real time to account for actual movement in inflation. So while higher costs this year might lead to a larger increase in 2027, they could also make the next few months very rocky for seniors who get most of their income from Social Security.
Worse yet, a larger COLA does not guarantee that Social Security recipients will be able to maintain their buying power in 2027. If benefits go up 3.8% but inflation continues to increase in the new year, seniors could end up losing out.
Seniors will need to sit tight
The good news is that a lot could change over the course of the next few months as far as inflation goes. If the conflict in the Middle East settles down and oil prices retreat, the cost of goods across the board could start to decrease. That could give Social Security recipients some much-needed breathing room.
Of course, a drop in inflation would likely set the stage for a less generous COLA in 2027. But seniors need to understand this tradeoff.
All told, seniors either have to accept a smaller Social Security COLA and lower prices, or a larger Social Security COLA and higher prices. There’s no way to uncouple those two things.
What seniors should hope for is that inflation cools in the coming months so they’re able to stretch their benefits further — even if that results in less of a boost in the new year.
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