By John I. Adams, Chairman, TSCL
The Social Security Administration (SSA) announced on October 14th that the 2027 COLA will be 3.6 percent. Social Security checks will increase on January 1st. The average beneficiary’s check will increase by $75.15 per month, from $2,087.52. to $2,162.67.
How was the 2027 COLA calculated?
The SSA calculated the COLA by taking the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for July, August, and September. The CPI-W is one of the government’s key measures of inflation. The CPI-W yearly change in July was 3.5 percent. In August, it was 3.4 percent, and in September it was 3.9 percent.
How does the 2027 COLA compare to past years?
The COLA in 2027 is 0.8 percentage points higher than last year’s COLA of 2.8 percent. It is close to the average COLA from 2020 to 2026 of 3.7 percent, but from a historic perspective it’s above average. From 2000 to 2026, the COLA averaged 2.6 percent.
How does the COLA compare to TSCL’s predictions?
Every month, TSCL releases a new prediction for the upcoming COLA using our statistical model, which is based on the CPI-W, Federal Reserve interest rates, and the unemployment rate. Back in January, the model expected inflation to cool throughout the year, predicting that the COLA would come in at 2.5 percent.
However, the model’s predictions ticked upward throughout the year, especially as oil prices climbed. After the May CPI-W release, when yearly inflation rose to 4.4 percent, our prediction rose to 3.8 percent.
The model’s final prediction for the year, released in September, was 3.5 percent. That’s 0.1 percentage points from the 2027 COLA of 3.6 percent.
What could have changed to make the 2027 COLA higher?
I’m sure that, like me, many of you are disappointed with the 3.6 percent COLA for 2027. COLAs simply haven’t kept up with inflation in the 2020s so far, especially with annual costs for Medicare Part B premiums often wiping out any gains from the COLA.
What might be most disappointing of all, though, is that we already have a better means for calculating the COLA that would at least begin to restore your benefits’ value. Instead of calculating the COLA with the CPI-W, we should use the Consumer Price Index for the Elderly (CPI-E), which is another inflation measure compiled by the government that’s designed to reflect the budget of a senior household.
What do you think of the 2027 COLA?
TSCL is doing a flash poll of American seniors to see what they think of the 2027 COLA. Make your voice heard by clicking on the link!
