2027's Social Security COLA Now Estimated at 4.7% - But Retirees Shouldn't Celebrate Yet

Social Security benefits are a key component of millions of Americans' retirement plans, and current projections indicate those payments could increase in 2027. 

Analysts have upped their predictions for the 2027 Social Security cost-of-living adjustment (COLA), suggesting the COLA could increase more than expected. While still just projections at this time, the potential benefit increase may seem positive, but it's actually not a reason to celebrate.

Here's what you need to know about the 2027 COLA and how inflation is affecting retirees.

The newest COLA projections

After the inflation rate reached the highest level in three years in May, independent Social Security and Medicare policy analyst Mary Johnson revised her COLA estimate to 4.7%. In May, Johnson predicted a 4.2% COLA.

Johnson noted that it's likely the COLA will climb even more as additional data, particularly data on gasoline prices, continues to come in.

In contrast to Johnson's higher COLA projection, the Senior Citizens League lowered its 3.9% May COLA estimate to 3.8% in June. The Senior Citizens League didn't specify why the projection declined, but every analyst uses their own formula to make their calculations, so the figures may be a result of a variation in formulas.

How the COLA is calculated

The COLA helps ensure that Social Security and Supplemental Security Income benefits are appropriately adjusted to keep up with inflation.

The COLA is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is calculated monthly by the Bureau of Labor Statistics. Only data from the third quarter of the year applies, and it's compared to data from the third quarter of the last year in which a COLA became effective. If the current year's data is higher, a COLA is applied and benefits are increased by that percentage during the coming year.

In May, the CPI-W rose by 0.7% for a 4.4% increase over the past 12 months. The final, official COLA won't be announced until this October.

Do COLAs actually keep up with inflation

The news of a larger Social Security benefit might seem like reason to celebrate, but a COLA reflects greater inflation, not an actual raise in benefits. And although the COLA is designed to ensure that benefits keep up with climbing inflation, that isn't always the case.

In 2026, a 2.8% COLA was applied to Social Security and Supplemental Security Income benefits, and the average $2,000 benefit increased by about $56. However, Johnson explains that for benefits to keep up with inflation in 2026, they would actually need to be increased by about $94 per month, and the adjustment fell short of that.

The potential effects of Medicare on the COLA

Medicare price increases could erode any increased benefits provided by the COLA. Medicare Part B premiums increased 5.9%, 5.9%, and 9.7% in the past three years. 

Such premium increases may partially or fully offset the COLA. For example, in 2026, the COLA added an average of $56 in Social Security benefits per month for retirees, but the Medicare Part B price increase consumed 32% of the COLA, leaving retirees with just a $38 increase.

Medicare Part B premiums may rise again in 2027. Surging oil prices increase energy costs, which drive up health care expenses like transportation and facility operations. Tariffs have also increased the price of medical supplies. 

A March 2026 congressional report also found that, during the past decade, overpayments to Medicare Advantage plans contributed $82 billion to Medicare Part B costs. Official Part B premium costs for 2027 should be released this November.

Main inflation drivers affecting COLA estimates

Projections for the 2027 COLA are volatile because the inflation drivers behind those estimates also fluctuate. Energy prices have surged dramatically and accounted for 40% of the inflation increase in April. As energy prices soar, so do other expenses, including airfare, travel, and even the cost of consumer goods.

The BLS reported that the index for energy increased 10.9% in March, 3.8% in April, and 3.9% in May, and that has a significant impact on inflation and the overall economy. As inflation continues to grow, analysts continue to revise their COLA projections, and those projections get higher and higher. That said, those projections may change and decline if the economy stabilizes and inflation decreases.

Bottom line

In a 2024 analysis, the Senior Citizens League reports that the purchasing power of Social Security income has declined by 20% since 2010. A higher COLA is welcome, but it doesn't reverse the long-term trend of the fact that Social Security benefits don't go as far, and retirees are forced to get by with less buying power.

If you or a loved one depends on, or will soon depend on Social Security benefits, watch for the official October announcement of the 2027 COLA. Factor the net check, not the headline percentage, into your retirement plan, and keep in mind that extra costs, like higher Medicare Part B costs, might eat into those extra funds.