OpenTheBooks CEO John Hart joins Varney & Co. to discuss long-term deficits in Social Security and Medicare as fiscal pressure mounts.
Social Security beneficiaries are expected to see a larger cost-of-living adjustment (COLA) in 2027 amid persistent 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 above the 2026 COLA of 2.8%, based on the latest inflation index (CPI) data released on Tuesday. TSCL estimated that if the proposed 3.8% COLA went into effect today, average earnings would increase by $73.62 from $1,937.53 to $2,011.15.
The COLA estimate of 3.8% was similar to last month’s forecast, and down slightly from the 3.9% forecast made in April.
By law, the annual Social Security COLA is calculated using the Bureau of Labor Statistics’ CPI data for the months of July, August and September. The announcement of the final COLA amount usually occurs in mid-October when the agency releases September inflation data.
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Social Security benefits could increase by 3.8% in 2027, according to the latest COLA estimate for next year. (Getty Images/iStock)
“We’re seeing inflation pick up when more than half of seniors can’t afford basic living standards,” said TSCL Executive Director Shannon Benton after the group’s June estimate was released, which also projected a 3.8% COLA by 2027.
“We’re talking about food, a roof over their head, and transportation. Many seniors already have to skip doctor’s appointments because of the cost, which costs us all a long time when we change preventive care to emergency care,” he added.
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The Social Security COLA aims to keep benefits in line 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, well above the Federal Reserve’s 2% target and putting more pressure on household budgets as wage gains may not keep pace with rising living costs.
The CPI-W, which is a version of the inflation metric used to calculate the Social Security COLA, increased 3.5% from a year ago in June.
A larger COLA will exacerbate the financial problems facing Social Security, which could lead to significant fund drains that could result in reduced benefits.
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Social Security’s key fund is facing cuts in 2032, which would trigger 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 increase the Social Security deficit by nearly $300 billion over the next decade and push the critical trust fund shortfall by three months starting in late 2032.
Once the trust fund is depleted, the Social Security Administration will be required by law to reduce benefits to match taxable income, which the CRFB estimates will result in a 25% reduction in beneficiaries “which will wipe out nearly a decade of COLA increases.”
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