Social Security's 2027 COLA Is Projected to Be the 6th-Largest Since 1993 -- Here Are the 3 Unique Factors Driving This Outsize Raise

The Social Security Administration's annual cost-of-living adjustment (COLA) for benefits is projected to be 3.5% in 2027, making it the sixth-largest raise since 1993. This significant increase has three main drivers.

Firstly, the September inflation report from the U.S. Bureau of Labor Statistics will provide the final data point needed to calculate the 2027 COLA. The COLA essentially represents a raise passed on to Social Security beneficiaries to account for inflation they've faced over the previous year. If benefits do not keep up with inflation, the purchasing power of Social Security income could decline over time.

Secondly, independent policy analyst Mary Johnson of The Senior Citizens League estimates the 2027 COLA will be 3.5%. If accurate, this would tie for the sixth-largest COLA raise over the past 35 years. This projection suggests a substantial increase in benefits, highlighting the impact of inflation on Social Security recipients.

Lastly, the COLA is calculated based on inflationary pressures faced by Social Security beneficiaries over the past year. By factoring in the latest inflation data from the Bureau of Labor Statistics, Social Security ensures that benefits maintain their purchasing power. This mechanism is crucial for protecting the long-term financial security of millions of Americans who rely on Social Security as a substantial portion of their retirement income.