Social Security benefits are adjusted annually through a cost-of-living adjustment, or COLA, designed to help beneficiaries keep pace with inflation. After record increases of 5.9% in 2022 and 8.7% in 2023, the pace of adjustments has slowed as inflation cooled. The 2026 COLA came in at 2.8%, adding roughly $56 per month on average for retirees, though higher Medicare premiums offset gains for some recipients.
Now, early inflation data for January 2026 suggests that the 2027 COLA could be smaller if price growth remains subdued in the coming months.
Early Projections for 2027
Estimates for next year’s adjustment vary widely. Independent analyst Mary Johnson projects a 1.2% COLA for 2027, which would mark the smallest increase since 2017’s 0.3% adjustment. The Senior Citizens League, a nonpartisan advocacy group, currently forecasts a 2.8% increase, while the Congressional Budget Office anticipates a 3.1% adjustment next year followed by 2.5% the year after.
These projections are preliminary and subject to change as more inflation data becomes available.
Inflation Trends and Calculation Method
The Social Security Administration calculates the COLA using third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. Specifically, the average CPI-W reading from July through September of the current year is compared with the same period in the prior year. Any percentage increase determines the following year’s COLA.
January 2026 data shows the CPI-W rose 2.2% over the previous 12 months. If inflation continues at a similar pace, the resulting COLA for 2027 may remain modest compared with the historically high increases seen in recent years.
Impact on Beneficiaries
The 2026 adjustment affected approximately 75 million beneficiaries. However, advocacy groups argue that smaller increases may not fully offset rising expenses, particularly in health care, housing and insurance. Surveys indicate that many older Americans already report financial strain. More than half of seniors surveyed by one advocacy group said they had skipped at least one health-related product or service in the past year due to cost concerns.
Separate survey findings suggest that many retirees believe a 3% adjustment is insufficient to keep up with their expenses, with a majority favoring increases of 5% or more.
Broader Economic Context
Although inflation has moderated compared to its peak, living costs remain elevated in several essential categories. Policymakers and economists continue to monitor price trends closely, as sustained lower inflation could translate into smaller annual benefit adjustments.
At the same time, Social Security’s long-term funding challenges remain a key policy issue, with future benefit levels and financing mechanisms subject to ongoing debate in Congress.
Conclusion
While the final COLA for 2027 will not be determined until third-quarter inflation data is finalized, early projections point to a smaller increase than the record adjustments of recent years. For beneficiaries, the size of next year’s adjustment will depend largely on how inflation evolves through mid-2026, underscoring the continued link between price trends and retirement income stability.
