Every year, millions of retirees in the United States wait for a number that can change their budgets: the Social Security cost-of-living adjustment, known as COLA.
This increase is calculated to help Social Security benefits maintain their value in the face of rising prices. In short, it seeks to ensure that retirees can continue paying their basic expenses when inflation makes products and services such as food, housing, medicines and transportation more expensive.
However, the latest estimates indicate that the expected 4.7% increase by 2027 may not come true.
Inflation changed the expectations of retirees
Earlier this year, Social Security beneficiaries received a 2.8% increase in their payments. But for many seniors that increase was not enough, as prices continued to rise and reduce their purchasing power.
The higher-than-expected inflation made some analysts think the next adjustment could be much more generous. In fact, in June, independent analyst specializing in Social Security and Medicare, Mary Johnson, estimated that the 2027 COLA could reach 4.7%.
That news raised expectations among many retirees facing tight budgets.
But the situation changed after new economic data.
The new projection points to an increase close to 3.7%
After knowing the most recent inflation data, Johnson modified his calculation and reduced his forecast.
Now, the estimate points to an increase of 3.7% for the 2027 COLA, a figure similar to that calculated by the Senior Citizens League, an organization that analyzes issues related to retirees and which projects an increase close to 3.8%.
The main reason for the change is that, although inflation remains high compared to previous years, it began to moderate slightly during June.
The final data is still missing to know the real increase
Retirees will still have to wait to find out the official percentage.
The Social Security COLA is determined using inflation data from the third quarter of the year, specifically records from July, August and September.
Therefore, until those numbers are published, there will be no definitive figure on how much payments will rise in 2027.
How to prepare if the increase ends up being smaller
Although many beneficiaries expected an increase close to 4%, experts recommend not depending on the most optimistic figure when organizing finances.
A more prudent strategy is to prepare the budget assuming a moderate increase.
For example, if a retiree calculates his expenses based on an increase close to 2.8%, any higher increase could become an additional margin of safety.
The idea is to prevent finances from depending on an increase that is not yet confirmed.
Medicare can also affect the money retirees receive
Another important point is the cost of Medicare, the health program for older adults in the United States.
Although it is not yet known how much the standard Medicare Part B premium will cost in 2027, retirees should consider that that expense may increase and reduce some of the additional money that comes with the COLA.
Last year, for example, the monthly Part B premium increased by $17.90, so many beneficiaries prefer to leave room for possible increases.
Reviewing expenses and income may be more important than waiting for the COLA
Specialists recommend that retirees review how much money they need each month and compare that figure with their guaranteed income.
In addition to Social Security, some people have:
If the numbers are not enough, there are still options to adjust the budget or look for new sources of income.
Working a few extra hours can be an alternative
For some retirees, continuing to work a few hours a week can be a way to supplement their income.
Today there are many options outside of traditional jobs. Some people make money from activities such as driving for transportation apps, pet sitting, offering freelance services, or doing gig work.
Even a small extra income can help cover expenses that your pension or Social Security can't pay for.
The key is not to wait for a big increase, but to prepare
If inflation continues to decline over the coming months, the 2027 COLA could fall short of the 4.7% that some expected and could even fall below 3.7%.
Therefore, experts recommend preparing finances with a conservative scenario.
A good way to do this is to calculate your essential expenses for the month and subtract guaranteed income, such as Social Security and any pensions.
The difference shows how much money needs to be covered and allows decisions to be made before an emergency arrives.
For many retirees, financial peace of mind won't just depend on the next Social Security increase, but on having a plan that works even if the COLA ends up being lower than expected.
