The Latest Inflation Update Offers Incredible News for Social Security’s 2027 COLA
Today, Aug. 12, is an especially important day for Social Security’s more than 71 million traditional beneficiaries (i.e., retired workers, workers with disabilities, and survivor beneficiaries). The July inflation report, released earlier today, is the first of three puzzle pieces used to calculate the upcoming year’s cost-of-living adjustment (COLA).
Social Security’s COLA is essentially an annual “raise” given to recipients to offset the effects of inflation (rising prices). If monthly payouts remained static from year-to-year and the cost of goods and services continued to climb, beneficiaries would lose buying power over time. Social Security’s COLA attempts to counteract this loss of purchasing power.
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Despite modestly easing inflation, a historic 2027 COLA appears to be on tap
Earlier today, the Bureau of Labor Statistics reported that trailing 12-month (TTM) inflation for July eased to 3.4% from a reported 3.5% in June. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is the inflationary measure used by the Social Security Administration to calculate the annual COLA, also rose by 3.4%.
Since Social Security’s annual raise is designed to mirror TTM CPI-W inflation, a month-to-month decline might not sound like good news. But looking only at the headline figure can be deceiving.
BREAKING: July CPI inflation falls to 3.4%, in-line with expectations of 3.4%
Core CPI inflation falls to 2.5%, also in-line with expectations of 2.5%.
Month-over-month CPI inflation rose +0.1%, up from -0.4% in June.
US stock market futures are rising on the news.
— The Kobeissi Letter (@KobeissiLetter) August 12, 2026
According to newly updated 2027 Social Security COLA estimates from The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, and Mary Johnson, an independent Social Security and Medicare policy analyst, next year’s raise is projected to be 3.6% or 3.4%, respectively.
If the average of TSCL’s and Johnson’s forecasts proves accurate, a 3.5% raise would be well above average. It would represent a tie for the sixth-largest percentage increase in benefits since 1992, surpassed only by raises of 4.1% (2006), 5.8% (2009), 3.6% (2012), 5.9% (2022), and 8.7% (2023).
It would also represent the sixth consecutive year in which beneficiaries have received at least a 2.5% raise. The last time benefits jumped by at least 2.5% for six straight years was 1988-1997, during which payouts increased by at least 2.6% annually.
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A silver lining awaits select retired-worker beneficiaries, too!
In addition to Social Security’s 2027 raise pacing well above its historic average over the last 35 years, tens of millions of retired-worker beneficiaries are on track to enjoy a silver lining for the first time since 2023.
According to a July 2024 report by TSCL, the purchasing power of a Social Security dollar plummeted 20% from 2010 to 2024. In other words, annual COLAs were insufficient to cover the inflationary pressures beneficiaries have faced. Chief among these pressures is the rapid rise in Medicare Part B premiums.
Traditional Medicare is comprised of Parts A (in-hospital stays), B (outpatient services), and D (prescription drugs). While Part A is free for roughly 99% of retired workers, Part B has a standard monthly premium that’s usually deducted from a retiree’s Social Security payout.
Historically, the monthly Part B premium has grown considerably faster (on a percentage basis) than Social Security’s annual COLA — but 2027 may offer a breath of fresh air. The latest Medicare Trustees Report calls for a 3.25% increase in the Part B premium next year.
If accurate, it would be the first time since 2023 that the percentage increase for Social Security benefits is greater than that of Medicare’s Part B premium. This should allow retired workers enrolled in traditional Medicare to hang onto more of next year’s raise.
