Social Security recipients are in for a cost-of-living increase (COLA) in their benefits next year, forecasters said Wednesday, as inflation rises above 4%.
The Senior Citizens League now forecasts a Social Security COLA of 3.8% for 2027, which would be a 1-point increase from this year’s adjustment of 2.8%.
Just two months ago, the group was forecasting a COLA of 3.3%. However, pressure from Iran’s war on oil and gas prices has pushed inflation to its highest level since April 2023, meaning beneficiaries will need a big increase in their benefits next year.
The COLA is supposed to ensure that the more than 75 million Americans who receive Social Security or Supplemental Security Income payments do not lose purchasing power as the value of the dollar declines.
If The Senior Citizens League’s forecast is correct, the average increase in benefits due to the 2027 COLA would be $77. That would raise the average Social Security benefit from $2,026 to $2,103.
The agency’s latest projections are driven by May’s tepid inflation numbers. The Consumer Price Index (CPI), released by the Bureau of Labor Statistics on Wednesday, showed an annual inflation rate of 4.2% in May, up from 3.8% in April. Energy prices are the biggest culprit: Gas prices rose 40.5% last year and airline costs rose 26.7%, according to CPI data. (A slightly different index, the CPI-W, is the basis for the COLA calculation.)
COLA forecasts this time of year from the Senior Citizens League and others, such as independent analyst Mary Johnson — who predicts a 4.7% 2027 COLA — are early calls based on limited data.
The COLA, which is announced annually in October, uses a figure that combines the July, August and September CPI-W. That means the first half of the calculations won’t be available for several months — and it’s hard to predict how much Americans will pay for gas later this summer. At $4.15 per gallon, gasoline prices are down more than 40 cents since they peaked in May.
Core inflation, which excludes variable energy prices, was more moderate at 2.9% in May, up 0.1 percentage points from 2.8% the previous month. Analysts see this as a good sign.
“So far we have seen no evidence that higher electricity costs are materially feeding into a sharper drop in inflation,” Gargi Chaudhuri, chief investment officer and portfolio strategist at BlackRock, said in a statement on Wednesday.
Still, Johnson says the next seven months will be challenging for seniors as they face higher costs while they wait for the COLA increase, which won’t affect Social Security checks until late December at the earliest. Recent inflation is “especially hard on low-income and senior Americans who live on a tight budget,” Johnson said, adding that consumers “spend more at the store but bring home less every trip.”
Americans are also on edge about the impending Social Security deficit. On Tuesday, a new government report found that the program’s trust funds could be depleted as soon as 2034, requiring a 17% cut in benefits unless Congress acts.
Last week, Treasury Secretary Scott Bessent was pressed by Sen. Bill Cassidy, R-La., on the administration’s plan to address the Social Security deficit during Senate Finance Committee testimony. Bessent said that “we inherited a mess” and promised that “we will make sure that the benefits remain as they are.”
