Seniors Just Got a Big Clue on Social Security's 2027 COLA

Social Security benefits are eligible for a cost-of-living adjustment (COLA) every year.

A new inflation report sheds light on a possible 2027 COLA scenario.

One of the most important aspects of Social Security is the program's annual cost-of-living adjustments, or COLAs. There are many seniors who collect Social Security for decades. If benefits weren't eligible for an inflation adjustments, retirees would be pretty much guaranteed to lose out on buying power over time.

Instead, Social Security benefits are eligible for a raise each year in line with inflation. When there's an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from one year to the next during the third quarter of the year, Social Security benefits increase automatically. Congress does not have to vote in a raise like it used to decades ago.

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Because Social Security COLAs are based on CPI-W readings from July, August, and September, it's impossible to nail down a COLA for the coming year in June. But experts can use existing inflation data to help guide their projections.

Following the release of May's CPI-W in June, there's a new estimate of what 2027's Social Security COLA might be. But whether it's good news is debatable.

Following May's CPI-W reading, the Senior Citizens League, an advocacy group, projected that 2027's COLA could amount to 3.8%. If that number is correct, it would surpass 2026's 2.8% COLA by a pretty wide margin. It could also provide significant relief for retirees on Social Security who may be struggling with this year's more modest raise.