Social Security COLA Update: What Today’s Inflation Report Means for Seniors - Newsweek

Millions of Social Security recipients now have a much clearer picture of how large their 2027 cost-of-living adjustment could be after the federal government released the second of three inflation readings used to calculate next year's increase.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 3.5 percent in the 12 months through August, the Bureau of Labor Statistics reported Friday. The CPI-W stood at an index level of 328.481 in August. That figure is particularly important for Social Security because it, not the more widely reported headline inflation rate, is the measure used to calculate the annual cost-of-living adjustment, or COLA.

The broader Consumer Price Index for All Urban Consumers (CPI-U), generally referred to simply as the CPI, increased 0.4 percent in August from the previous month on a seasonally adjusted basis and was 3.4 percent higher than a year earlier.

Friday's figures bring the final 2027 COLA calculation closer to completion: August is the second month of the three-month period used to determine the adjustment, so only September's CPI-W figure remains outstanding.

As of July, more than 75.7 million people were receiving Social Security, Supplemental Security Income, or both, according to the latest Social Security Administration data. For beneficiaries, the annual COLA determines how much their payments will rise at the beginning of the following year to account for increases in consumer prices.

The 2027 adjustment is drawing particular attention after inflation accelerated earlier this year. In July, the CPI-W was 327.104, up 3.4 percent from July 2025. The headline CPI-U was also 3.4 percent higher year over year in July and rose 0.1 percent from June on a seasonally adjusted basis.

Social Security recipients received a 2.8 percent COLA for 2026, following 2.5 percent increases in 2025 and 3.2 percent in 2024. The much larger 8.7 percent adjustment paid in 2023 followed the surge in inflation earlier in the decade.

Before Friday's August inflation report, the Senior Citizens League projected a 3.6 percent COLA for 2027, down from its earlier forecasts of 3.8 percent in June and July. The group said its August projection was based on July's 3.4 percent annual increase in the CPI-W.

The annual CPI-W inflation rate reported Friday should not be confused with the eventual Social Security COLA.

Under federal law, the Social Security Administration calculates the adjustment by averaging the CPI-W index levels for July, August and September and comparing that average with the same three months in the last year a COLA took effect. The percentage increase is then rounded to the nearest one-tenth of 1 percent.

For the 2027 calculation, the comparison point is the third quarter of 2025. CPI-W stood at 316.349 in July 2025, 317.306 in August and 318.139 in September, producing a three-month average of 317.265. That average ultimately produced the 2.8 percent COLA that took effect in 2026 when compared with the corresponding 2024 figure.

The first number on the 2026 side of the calculation was July's CPI-W reading of 327.104. Friday's August reading now supplies the second. September's figure will determine the final three-month average and therefore the exact 2027 COLA.

It's too early to definitively say how much benefits could rise. The Committee for a Responsible Federal Budget (CRFB) predicted a 3.4 percent COLA next year based on this morning’s inflation data. That would be 0.6 percentage points higher than the 2.8 percent COLA in 2026.

As a rough illustration, if the eventual 2027 COLA matched the 3.45 percent average of July's 3.4 percent and August's 3.5 percent annual CPI-W readings, the average retired-worker benefit would rise by about $71.97 a month, or $863.60 a year.

The average retired worker currently receives $2,085.98 a month, according to the latest Social Security Administration data, meaning a 3.45 percent increase would lift the average payment to roughly $2,157.95 a month, or $25,895.36 a year.

However, recipients will need to wait for the next BLS inflation release to confirm the final COLA.

Beneficiaries have one more inflation report to wait for, with the BLS scheduled to publish its September Consumer Price Index report at 8:30 a.m. ET on October 14. That report will include the final CPI-W reading needed for the calculation, and the Social Security Administration will announce the official 2027 COLA the same day.

The new adjustment will then apply to Social Security benefits payable for December 2026, which beneficiaries generally receive in January 2027. Supplemental Security Income (SSI) payments are also increased in line with the annual COLA.

Contact Newsweek editors on this story: Daniel Orton and Sam Wilson.