Latest Social Security COLA Projection May Be Cause For 'Worry' For Retirees

Social Security benefits are the ticket to a stress-free retirement for millions of older Americans. But the program's cost-of-living adjustments, or COLAs, tend to be a sore spot for seniors.

In 2026, Social Security benefits got a 2.8% COLA. And many seniors are no doubt hoping to see their raise increase in 2027.

But next year's Social Security raise may not be much to write home about, and that's something retirees need to prepare for.

Social Security benefits may only increase 2.8%

Social Security COLAs are based on inflation readings from July, August, and September compared to the same period of the previous year. At this point in the year, any COLA number that comes out is merely a projection and not an official statement from the Social Security Administration.

The Senior Citizens League, an advocacy group, puts out COLA projections after readings from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) are released. It's a way of letting Social Security recipients know what might be in store for the new year.

Based on March's CPI-W, the group is calling for a 2.8% COLA in 2027, which would be the same raise as 2026. A COLA that size would increase the average retirement benefit by $56.69, allowing it to go from $2,024.77 to $2,081.46. However, that increase does not account for Medicare Part B premium hikes, which eroded this year's COLA.

Last year, Senior Citizens League Director Shannon Benton called a 2.8% COLA "meager," saying, "The 2026 COLA is going to hurt for seniors." If next year's raise winds up being just 2.8%, many seniors are likely to struggle financially.

What's driving a low COLA?

Social Security COLAs are tied to the CPI-W directly. There was a modest increase in the index in March, led by rising energy prices in the wake of the conflict overseas.

On the one hand, it's almost a good thing that 2027 COLA projections are only coming in at 2.8% so far. If they were coming in higher, it would be an indication of more rampant inflation.

But that's the problem. Social Security COLAs are only meant to keep up with inflation, not beat it. When costs rise, Social Security benefits go up. But what seniors gain in the form of larger monthly checks, they lose in the form of paying more for essentials like gas, groceries, and utilities.

Plus, seniors tend to spend a large chunk of their income on health care. And health care cost increases tend to outpace broad inflation. So seniors on Social Security often get stuck losing buying power from year to year, even when COLAs are more generous.

The problem with COLA calculations

As mentioned above, COLAs are based on the CPI-W. But that index measures the spending patterns of working Americans, not retirees. And that disconnect tends to hurt Social Security recipients.

The Senior Citizens League has long advocated for a different method for calculating COLAs. Specifically, it wants Congress to start measuring those annual increases based on the Consumer Price Index for the Elderly (CPI-E), which better represents seniors' spending habits. The group has also pushed for a minimum 3% COLA each year.

Because COLAs are based on the CPI-W, they don't do a good job of accounting for rising health care costs, since working-age people tend to spend a smaller percentage of their income on medical expenses than seniors.

Medicare Part B premiums, for example, tend to rise from year to year. Those premiums are paid directly out of Social Security benefits for enrollees in both programs.

This year, the cost of Part B rose by almost $18. By contrast, this year's COLA caused the average Social Security retirement benefit to rise by $56. 

So all told, the increase in Part B alone ate up about one-third of the typical 2026 raise. And that pattern is likely to repeat itself not just next year, but in general, if lawmakers don't change the way COLAs are calculated.

Seniors have been unhappy with COLAs

A 2025 study by the Senior Citizens League found that 73% of seniors depend on Social Security for more than half their income. So not surprisingly, last year, only about 10% of seniors that the group surveyed said they were happy with their 2.8% COLA for 2026.

The group's research also found that about 7.3 million seniors live on less than $1,000 a month. For people in that boat, stingy COLAs aren't just annoying. Rather, they can be financially devastating.

Bottom line

Your Social Security benefits may play a significant role in your retirement plans. But it's important to recognize that the program's COLAs do not do a good job of helping seniors maintain their buying power over time. 

If you want to avoid struggling financially in retirement, don't just rely on Social Security for income. Instead, set yourself up with multiple income streams. Those could include retirement savings you build during your working years, passive income from investments, or earnings from part-time work you continue to do when you're older.

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