The Next Clue About Your 2027 Social Security Raise Drops August 12 - Here's What to Watch

A key date is approaching for retirees who depend on Social Security benefits for part of their retirement plan. On August 12, the July Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data is scheduled to be released, and it provides the first concrete look at how inflation might affect the 2027 COLA and the benefit amounts issued next year.

Here's what to know about how the COLA is calculated, what information provided on August 12 might indicate, and how to prepare for potential benefits changes in 2027. 

What's at stake with the 2027 COLA

The COLA helps ensure that Social Security benefits keep up with inflation. If inflation increases, the COLA boosts benefits over the next year to help make up for the increased costs retirees face for expenses like health care and housing.

The 2026 COLA was 2.8%, meaning Social Security recipients got a small increase in benefits. However, many people felt that the increase fell short and that inflation ultimately outpaced the benefit increase.

How Medicare costs affect benefits increases

In 2026, the standard Medicare Part B premium rose by $17.90 per month, so it quickly ate into the COLA increase for retirees who were enrolled in both programs. The annual Medicare trustees report has projected a Medicare Part B monthly premium of $209.50 in 2027, which would be an increase of $6.60 per month compared to 2026's premium. While it's a relatively small increase, it adds up over the course of the year, and future increases are projected to be more significant.

A larger 2027 COLA has the potential to increase benefits more, making up for some of the shortfall that retirees felt resulted from the 2026 COLA.

How the COLA is calculated

The Social Security Administration (SSA) calculates the COLA using CPI-W data, which tracks inflation. Only data from the third quarter is used, and the inflation rate in July, August, and September is compared to the inflation rate from the same period during the prior year. COLA is based on the average percentage change in the third quarter. If inflation increases, a COLA percentage is applied to benefits in the next calendar year. If inflation decreases or stays the same, no COLA is applied, and benefits remain at the same level.

Why retirees should circle August 12 on their calendars

Analysts have been projecting the 2027 COLA for months, but their projections have only been based on inflation data from the first and second quarters, neither of which is actually used in calculating the COLA.

On August 12, the July CPI-W data should be released, and that's the first concrete data available that should actually be used to calculate the COLA. It may hint at whether a COLA may be applied in 2027, and it's the first solid bit of data that helps analysts understand how the COLA is trending.

Keep in mind that the July CPI-W data is just one-third of the data that should ultimately be used. Until August and September data are also released, we're still seeing a small piece of the puzzle, and an unusually hot or cool single report might not accurately reflect the end COLA calculation. The SSA should release the official COLA in October.

The potential downside to a larger COLA

A larger COLA might sound like a positive change, since it results in higher Social Security benefits payments, but it's important to understand just how the COLA works and what it signifies.

The COLA is designed to help preserve purchasing power against inflation, but not to improve any retiree's financial situation. A bigger raise won't fix a budget that's already strained, and in fact, it indicates a rise in inflation and overall increased living costs.

The timing of the COLA matters, too. Though it's announced in October, it goes into effect the following January. It's calculated based on third-quarter inflation data, meaning a higher COLA indicates that retirees have already been paying higher prices on a set benefit amount that hasn't yet increased. If inflation climbs early in the year, retirees may have to make up the difference and live on benefits that don't reflect the inflation that's impacting the economy.

Bottom line

No one's yet able to accurately predict just what the 2027 COLA may be, and not knowing how your benefits may be affected could be worrisome. While you can't control the COLA, focus on factors that you're able to control. Consider working to trim your expenses or add income through part-time work. Just be sure to refer to the Social Security retirement earnings test if you're below normal retirement age; depending on how much you earn, some of your benefits might be withheld.

This is also a good time to revisit your budget and your retirement plan. Consider all of your income sources and what changes you may need to make now to ensure you meet your retirement goals regardless of whether you receive a Social Security boost.