“Stingy. Inadequate. Unfair.” These are just some of the words seniors most likely used to describe their 2026 Social Security cost-of-living adjustment, or COLA. And given that this year’s raise came in at just 2.8%, that’s understandable.
While Social Security recipients got to enjoy a couple of large COLAs in the wake of the pandemic, in recent years, those raises have been meager. And that’s made it harder for Social Security beneficiaries to keep up with rising costs.
But 2027 is shaping up to be very different. Experts agree so far that next year’s Social Security COLA could be the largest in years. But whether that’s a good thing is up for debate.
What the experts predict for 2027’s Social Security COLA
Even though it’s too early in the year to nail down an official Social Security COLA, experts can use current inflation data to come up with educated guesses. And following the most recent Consumer Price Index, the nonpartisan Senior Citizens League updated its 2027 COLA projection to 3.8%.
That’s encouraging in its own right. But independent Social Security analyst Mary Johnson recently increased her 2027 COLA projection to 4.7%.
That’s quite a jump from the 4.2% increase she anticipated just a month ago. Plus, Johnson hinted that her 4.7% estimate could rise even more if inflation remains elevated.
Why seniors shouldn’t celebrate a large Social Security COLA
A Social Security COLA in the upper 4% range might seem like a huge win. But one thing seniors should realize is that large COLAs come at the cost of higher inflation.
See, Social Security COLAs are different from the raises working folks get at their jobs. Someone who goes above and beyond may get rewarded with a larger raise based on merit. And that raise could be enough to change that person’s lifestyle.
Social Security COLAs are based solely on inflation. And they’re designed to match inflation, not beat it. So the best to hope for out of any given COLA is the ability to keep up with rising costs.
If Social Security’s 2027 COLA does indeed come in at 4.7% or that vicinity, it will mean that inflation was elevated through the months of July, August, and September, since those are the specific months COLAs are based on. So while seniors may be happy to see their benefits increase a lot in the new year, they’re apt to be pretty unhappy to see their costs continue to rise throughout the summer.
Don’t misunderstand what COLAs are meant to do
One thing all current and future retirees should realize is that it’s extremely important to have income outside of Social Security for inflation-beating purposes. Although it’s a helpful thing that COLAs exist, those raises don’t help seniors get ahead financially.
The best way to beat inflation over the course of a lengthy retirement is to have savings and investments for supplemental income.
A stock portfolio could generate returns in retirement that outpace inflation. Bonds won’t necessarily do the same, but they can provide predictable income and serve as a cushion so that if Social Security checks fall short, the interest they pay can pick up the slack.
The Social Security Administration typically announces COLAs in October, so seniors won’t know for a while what their 2027 raise will be. But it’s important to keep things in perspective. A generous COLA might seem like a cause for celebration. But if it happens, it’s only going to arrive after months of potential financial strain.
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