Think a Bigger Social Security COLA in 2027 Is a Lock? Here’s the Truth.

If you’ve been having a hard time keeping up with your expenses this year, you’re in good company. Inflation has surged in the wake of the Middle East conflict. And these days, everything from gas to groceries to clothing seems to be more expensive.

If you’re a retiree on Social Security, you may be having an especially hard time keeping up with rising costs based on the cost-of-living adjustment (COLA) you got at the start of the year. Benefits rose 2.8% across the board in January, but inflation has outpaced that increase.

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Many retirees are hoping 2027’s COLA will be more generous than this year’s Social Security raise. And initial estimates are, in fact, calling for a larger COLA in the new year.

But that larger raise is not guaranteed. And banking on it could throw your finances for a loop.

A larger COLA isn’t a given

Based on recent inflation data, the Senior Citizens League, an advocacy group, estimates next year’s Social Security COLA at 3.8%. Independent Social Security analyst Mary Johnson’s estimate is similar at 3.7%.

But Social Security COLAs are based on third-quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Until CPI-W data for July, August, and September comes in, we won’t know what next year’s COLA will amount to.

Now, based on recent trends, it’s looking likely that 2027’s COLA will be higher than 2.8%. But if inflation happens to cool substantially over the next couple of months, that could change.

For this reason, it’s best not to bank on any given COLA at this stage. You may, in fact, want to err on the side of expecting a smaller COLA so that if a larger raise arrives, you’ll have that much more wiggle room in your budget.

A larger COLA probably won’t come to your rescue

Even if 2027’s Social Security COLA is much larger than this year’s 2.8% raise, it doesn’t mean your financial problems will be solved. COLAs are designed to simply match inflation. If you’ve been struggling, a more generous raise may not do a whole lot for you.

If that’s the case, it’s time to rethink your budget and income plan. That could mean downsizing your living space and/or working a part-time job to supplement your Social Security checks.

Working could also put some cash in your pocket to invest. And even a modest return from a bond and dividend stock portfolio could provide you with income that helps you make ends meet on top of what Social Security gives you.