For employees, receiving a smaller raise than initially expected isn’t a good thing. However, it could be a different case altogether for retirees who receive Social Security benefits.
Experts’ predictions of what the 2027 Social Security cost-of-living adjustment (COLA) will be have declined recently. The Senior Citizens League (TSCL), a non-profit organization that advocates for seniors, now projects a 3.6% increase, down from previous forecasts in May and June of a 3.8% jump. Independent Social Security and Medicare analyst Mary Johnson cut her COLA projection from 4.4% to 3.4%.
Some retirees could be disappointed that the COLA could be lower than predicted earlier this year. However, if the latest forecasts prove accurate, it should be better news than a larger Social Security check next year.
Image source: Getty Images.
Why a shrinking COLA forecast is good news
Lower COLA projections mean that prices are rising more slowly than anticipated. The annual COLA is calculated using inflation numbers — specifically, an inflation metric called the Consumer Price Index for Urban Wage Earners and Clerical Professionals (CPI-W).
One key reason a shrinking COLA forecast is good news for retirees is the adage that “a bird in the hand is worth two in the bush.” Whatever the Social Security benefit increase will be for 2027, it won’t come until January. In the meantime, retirees must pay for any higher prices now. Money in your hands today is worth more than the same amount months in the future.
TSCL Executive Director Shannon Benton highlights this issue in a press release. She stated, “Frankly, it’s infuriating that seniors must wait for a COLA to catch up with prices that have already driven up their grocery bills, housing costs, healthcare expenses, and insurance premiums.”
However, there’s an even more important reason why retirees should be glad that the COLA projections are lower. Annual Social Security increases have historically failed to keep pace with the higher prices retirees face.
That’s because of a fundamental issue with the CPI-W. The metric wasn’t designed to reflect the spending of older Americans, especially healthcare costs in retirement.
It’s not over ’til the BLS sings.
Although 2027 Social Security COLA forecasts have declined, they could easily rise again. Energy prices, in particular, remain highly volatile due to the uncertainty surrounding the U.S. war with Iran. If oil prices increase sharply in September, expect COLA projections to increase in lockstep.
Most importantly, though, the actual Social Security COLA percentage won’t be available until the September inflation numbers are finalized. The U.S. Bureau of Labor Statistics (BLS) is scheduled to release its September inflation report on Oct. 14, 2026. Retirees won’t know for sure how much of a “raise” they will receive next year until then.
Source link
