Cheryl Casone reviews the July CPI inflation report, which matched expectations. She noted declines in energy and gasoline prices amid rising stock futures, as the Labor Department released the latest economic data.
Social Security recipients are still projected to receive a larger cost-of-living adjustment (COLA) in 2027 than they did this year, although the estimate has dipped as inflation softened in July.
By statute, the annual Social Security COLA is derived from the Bureau of Labor Statistics’ Consumer Price Index (CPI) for July, August, and September, using the CPI‑W variant. The adjustment increases beneficiaries’ payments to reflect changes in the cost of living; the 2026 COLA amounted to a 2.8% increase.
The Bureau of Labor Statistics announced Wednesday that the July CPI rose 3.4% year‑over‑year, down from a 3.5% annual increase in June.
Multiple organizations have issued 2027 COLA projections based on the July data and forecasts for the next two months, estimating the adjustment will fall between 3.2% and 3.6%.
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The nonpartisan Committee for a Responsible Federal Budget gave the lowest estimate, projecting a 2027 COLA of 3.2% once the final data are released this fall. Its analysis showed that CPI‑W was flat in July and up 3.4% over the past year.
“High COLAs can offer short‑term relief for seniors, yet they also create substantial cost pressures for a Social Security trust fund that is projected to become insolvent in just six years,” CRFB noted, warning that if the fund runs dry, automatic benefit reductions of 22% would be triggered.
CRFB has suggested reforms to the COLA formula aimed at strengthening Social Security’s solvency, such as capping adjustments for high‑income beneficiaries and implementing a flat‑rate COLA.
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Social Security’s 2027 COLA is projected to fall between 3.2% and 3.6%, with roughly two months remaining before the official adjustment is finalized. (Getty Images/stock)
AARP, which advocates for policies benefiting Americans aged 50 and older, estimates that the 2027 COLA will be 3.5% in its inaugural forecast released ahead of the third‑quarter inflation data.
“Providing beneficiaries with reliable estimates of their upcoming benefit increase sooner allows them to begin planning earlier,” said Rich Johnson, AARP vice president of financial security.
“Considerable uncertainty remains regarding how food and, in particular, energy prices will evolve over the next two months; the outlook is not fixed.”
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A woman enters a Social Security office in Houston, Texas, on July 13, 2022. (Mark Felix/The Washington Post / Getty Images)
The Senior Citizens League (TSCL) projected a 2027 COLA of 3.6%, which would represent an increase of 0.8 percentage points over the 2026 adjustment.
TSCL’s analysis indicates that applying the projected COLA today would raise the average monthly benefit by about $69.75, lifting it from $1,937.53 to $2,007.28.
“One of the key uncertainties in this year’s forecast is inflation’s volatility,” said Shannon Benton, TSCL executive director. “It began the year at 2.2%, climbed to 4.4% by May, and then retreated to 3.5% in June.”
“Such instability can skew projections, but our model filters out short‑term spikes and dips, keeping our forecasts on a steady trajectory,” Benton added.
The official 2027 COLA will be unveiled on October 14, following the Bureau of Labor Statistics’ September CPI release, and will take effect with beneficiary payments beginning in January.