Social Security's 2027 Cost-of-Living Adjustment (COLA) Was Just Announced. Here's Where It Stands.
Key PointsSocial Security benefits will increase by 3.6% beginning in January 2027.
The annual cost-of-living adjustment (COLA) for Social Security recipients has been announced, with a significant 3.6% boost set to take effect in 2027. This is the largest increase since 2023 and ranks among the top 17 largest COLAs in the past 30 years.
The COLA is calculated using the Consumer Price Index for Wage Earners (CPI-W), which measures inflation faced by clerical and wage-earning workers. The Social Security Administration (SSA) follows a three-step process to determine the annual COLA. In the third quarter of the year, the CPI-W increased by 3.6% year over year.
While the 3.6% COLA is a welcome increase, there are two main issues to consider. First, the COLA is a reactive measure rather than a proactive one, meaning it doesn't directly address current high inflation rates. Second, the COLA hasn't kept pace with real inflation experienced by seniors, resulting in a loss of 13.7% of their purchasing power since 2016. This is particularly concerning for the 39% of recipients who rely on Social Security for all of their retirement income.
Given these challenges, recipients will need to budget with the understanding that the COLA may not fully offset inflation. However, the 3.6% bump is still appreciated by those who will receive it.
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