We're very early in the game here, but it's possible that Social Security benefits could see a 3.6% hike for the cost-of-living adjustment in 2027, based on newly released estimates.
We will need two more months of inflation data – August and September – before any precise figure will be released.
The official COLA adjustment for those receiving Social Security benefits will be announced Oct. 14 once the U.S. Bureau of Labor Statistics releases new CPI data for September.
The early estimate reflects only the inflation trend for July. The next round of consumer price index data for August will be released by the U.S. Bureau of Labor Statistics on Sept. 11.
What was the CPI rate for July?
On Wednesday, Aug. 12, the U.S. Bureau of Labor Statistics announced that the Consumer Price
Index for All Urban Consumers rose 3.4% in July over the last 12 months. That follows a 3.5% increase year-over-year in June.
The CPI increased 0.1% month-to-month in July after falling 0.4% in June.
According to the Bureau of Labor Statistics, the index for shelter rose 0.1% in July, accounting for roughly two-thirds of the monthly all items increase.
The index for food rose 0.1% over the month. Consumers who ate in restaurants and elsewhere saw even bigger price hikes, as the index for food away from home increased 0.3%.
The medical care index increased 0.4% in July after falling 0.1% in June.
On a good note for many consumers, the prescription drugs index decreased 0.8% in July. And the energy index fell month-to-month 1.5% in July.
Year-over-year, inflation took its toll. The energy index rose 14.7% for the 12 months ending July. The food index increased 3% over the last year.
Electricity rose 4.2% year-over-year in July. Gasoline rose 24.6% year-over-year in July.
What's the latest forecast for the 2027 hike in COLA for Social Security?
The Senior Citizens League, a large nonpartisan group representing the older adults, released its much-watched monthly forecast on Wednesday, Aug. 12, following the release of the CPI news for July.
The group estimates that Social Security’s 2027 Cost of Living Adjustment will be 3.6% in 2027, which would be higher than the 2.8% hike in 2026.
Average benefits could go up $69.75 a month if the 3.6% forecast proves correct, the group noted.
Remember, we're just dealing with estimates right now. The official COLA hike figure for Social Security benefits for 2027 will not be released for several weeks.
Mary Johnson, an independent Social Security and Medicare policy analyst, issued another forecast for the 2027 COLA hike, indicating that her estimate is 3.4% for next year.
“July’s data is important to pay attention to because it’s used in calculation of the final COLA that will be announced in October,” Johnson said in a statement.
She noted that the moderation in recent inflation data drove her to lower her COLA estimate from higher peaks earlier this year.
How the Social Security COLA is calculated
The annual cost-of-living adjustment for Social Security benefits is based on how inflation is running in the third quarter. Each year, the formula reflects monthly changes for July, August and September for the Consumer Price Index for Urban Wage Earners and Clerical Workers.
As a reference, the Consumer Price Index for Urban Wage Earners and Clerical Workers increased 3.5% in June over the last 12 months.
This year's third-quarter inflation numbers will be compared with last year's third quarter to get to the upcoming COLA figure for Social Security benefits.
The latest 3.6% forecast is down a tad from previous expectations. Earlier in the summer, the Senior Citizens League projected that Social Security’s 2027 Cost of Living Adjustment could be 3.8% in 2027.
The estimate was initially rolled out June 10 after the U.S. Bureau of Labor Statistics released new CPI data for May, and it remained unchanged when a new estimate was released after June CPI data was announced on July 14.
A 3.8% COLA hike would be a full percentage point higher than this year’s COLA of 2.8%.
By contrast, the COLA hike was 2.5% in 2025, and 3.2% in 2024. It was 8.7% in 2023, as post-COVID inflation reached itspeak.
Shannon Benton, executive director of the Senior Citizens League, which was established in 1992, said many seniors face significantly higher costs as it is for rent, transportation, and medical expenses. The inflation adjustment, while welcome, doesn't bridge the gap enough to make up for the difference between what many seniors bring in each month and the money they need to live with dignity, she said.
“One of the biggest challenges this year has been the sharp swings in inflation," Benton said in a prepared statement Wednesday, Aug. 12.
"It started at 2.2% in January, climbed to 4.4% in May, then fell to 3.5% in June. Fortunately, our model is designed not to overreact to these swings, keeping our COLA projections relatively steady.”
She once again focused on the financial stress that seniors face when they're hit with higher prices.
“Frankly, it’s infuriating that seniors must wait for a COLA to catch up with prices that have already driven up their grocery bills, housing costs, health care expenses and insurance premiums," Benton said.
"A higher COLA is welcome, but seniors shouldn’t have to lose purchasing power year after year before Washington acknowledges what they’re experiencing."
Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, said in a statement emailed to the Detroit Free Press that some discussion has taken place over the years indicating that that the overall CPI does not reflect how retirees spend money, especially their higher health care expenditures.
He noted that some alternative measures could be better but using those measures would no doubt become a budget issue, driving up costs for the Social Security program
Regardless of how COLA is calculated, he said, having at least some adjustment for inflation is a huge benefit for retirees, as this is really the only widespread income source for retirees that protects against inflation.
Where is inflation heading?
Mark Zandi, chief economist for Moody's Analytics, said he expects those receiving Social Security benefits will see a bigger COLA hike in 2027 than 2026.
Moody's is forecasting that year-over-year CPI inflation will be 3.5% for the third quarter of 2026, Zandi told the Detroit Free Press on Wednesday, Aug. 12.
"A lot also depends on whether the war in Iran goes off the rails and oil prices jump again," Zandi said.
"We are assuming oil prices will remain near $80-$85 per barrel through the quarter, but it isn’t hard to envisage scenarios in which the war continues, the Strait of Hormuz remains mostly closed, and oil prices increase."
If that's the case, he said, CPI inflation will rise further in the third quarter, which would drive up the COLA adjustment that Social Security beneficiaries will see next year.
The problem that many consumers, including older adults, face is the stubborn persistence of inflation in recent years. Higher prices stuck around for far longer than many initially projected.
"Inflation has not been too high for a month or two; it has been too high for more than five years," wrote Diane Swonk, chief economist for KPMG, in an early August report.
Some analysts see continued risks that inflation will remain high in the near future.
How many seniors rely on Social Security alone?
Estimates can be all over the map on how many retirees rely exclusively on Social Security payments each month to pay their bills – especially as many private employers no longer offer traditional pension plans to many workers. Some lower paid workers may work in jobs that do not offer 401(k) plans, either.
The Senior Citizens League released a survey in June that estimated that 24.6 million seniors, or 44% of the country’s approximately 55.8 million retirement-age population, depend on Social Security for 100% of their income. The survey was based on information from 904 seniors who were asked about their finances, satisfaction with Social Security and Medicare, and support for various policies aimed at strengthening the benefit programs.
Almost three-fifths of those seniors who completed the survey said they were dissatisfied with the amount they receive from their monthly Social Security checks. And 89% said they felt the 2026 COLA hike of 2.8% was too low and that their benefits tend to grow more slowly than inflation.
Yet other research indicates that many more people do have savings and other resources in retirement other than Social Security benefits.
Gal Wettstein, associate director of health and insurance at the Center for Retirement Research at Boston College, pointed out an earlier report published by the Cambridge University Press that indicated that retirement income is often underreported,many times overstating the dependence on Social Security income alone.
Wettstein said the best estimate is that about 14% of retirees rely on Social Security for at least 90% of their income.
The annual cost-of-living adjustment for Social Security benefits, he said, is an extremely valuable feature. No current private insurance product combines lifetime income with virtually full inflation protection, he said.
"In some sense, this is priceless! The only fly in the ointment is that the adjustment happens once a year so there is a slight lag between when prices rise and when benefits adjust," Wettstein said.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
This article originally appeared on Detroit Free Press: Social Security payments likely to be higher in 2027. But how much?
