Social Security recipients could see bigger cost-of-living adjustment in 2027, new forecast says

close video Report warns of fiscal doomsday as Medicare and Social Security face $193T shortfall OpenTheBooks CEO John Hart joins Varney & Co. to discuss long-term Social Security and Medicare deficits as fiscal pressures mount. Social Security beneficiaries are expected to see a larger cost-of-living adjustment (COLA) in 2027 amid persistently high inflation this year, a new report finds. An analysis by The Senior Citizens League (TSCL) predicts that the 2027 COLA will be 3.8%, or 1 percentage point higher than the 2026 COLA of 2.8%, based on the latest consumer price index (CPI) inflation data released on Tuesday. TSCL estimated that if the projected 3.8% COLA took effect today, average benefits would rise by $73.62 from $1,937.53 to $2,011.15. The estimate of a 3.8% COLA was the same as last month's prediction, and is down slightly from the 3.9% projection made in April. By law, the annual Social Security COLA is calculated using the Bureau of Labor Statistics' CPI inflation data for the months of July, August and September. The announcement of the final COLA amount typically occurs in mid-October with the agency's release of September inflation data. NATIONAL DEBT INTEREST AND ENTITLEMENT SPENDING PUSH FY2026 FEDERAL BUDGET DEFICIT TOWARD $2 TRILLION Social Security benefits could rise 3.8% in 2027, according to the latest estimate of next year's COLA. (Getty Images/iStock) "We're seeing inflation on the rise when more than half of seniors already can't afford basic living standards ," said TSCL Executive Director Shannon Benton after the release of the group's June estimate that also projected a 3.8% COLA for 2027. "We're talking about food, a roof over their head, and transportation. Many seniors already have to skip doctor's appointments due to costs, which costs all of us more in the long run when we swap preventative care for emergency care," she added. SOCIAL SECURITY HAS LESS THAN 10 YEARS BEFORE RESERVES ARE EXHAUSTED, NEW TRUSTEES REPORT WARNS Social Security COLA aims to keep benefits on pace with inflation. (Wesley Lapointe/For The Washington Post via Getty Images) The latest CPI inflation data showed prices were up 3.5% from a year ago in June, a level that's well above the Federal Reserve's 2% target and creates significant pressure on household budgets as wage gains may not keep up with the rising cost of living. The CPI-W, which is the version of the inflation metric used in calculating Social Security's COLA, was up 3.5% from a year ago in June. A larger COLA would also exacerbate the financial issues facing Social Security, which is on a path that would result in the insolvency of a key trust fund that could in turn cause benefit cuts. AMERICANS RETHINK SOCIAL SECURITY TIMING AS LONGER LIFESPANS AND INSOLVENCY FEARS RAISE THE STAKES Social Security's key trust fund is facing depletion in 2032, which would prompt automatic benefit cuts if Congress doesn't act. (Getty Images/stock) The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated in May that a 3.8% COLA in 2027 would worsen Social Security's fiscal shortfall by about $300 billion over the next decade and advance the insolvency of a key trust fund by three months from late 2032. Once the trust fund is depleted, the Social Security Administration will be required by law to cut benefits to match incoming payroll tax revenues, which CRFB estimates will result in a 25% cut for beneficiaries that would "erase almost a decade's worth of COLA increases." GET FOX BUSINESS ON THE GO BY CLICKING HERE