Government inflation data released on Friday is pointing toward a 3.6 percent increase in Social Security benefits next year.
The official Social Security cost-of-living adjustment, known as the COLA, is expected to be announced on Oct. 14, when the government releases September inflation figures. The COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The index values for July, August and September are averaged to produce the official COLA.
With two of those three figures now released, AARP forecast the 3.6 percent COLA on Friday. If that projection holds, the COLA would be the largest since 2023, when the inflation adjustment was 3.2 percent. Some experts think the current surge in oil prices could nudge the final figure a bit higher. This year’s COLA was 2.8 percent.
The CPI-W reflects price changes for a group of goods and services bought by working people, and many experts argue that it doesn’t accurately measure the unique price pressures facing seniors — especially rising health care costs. Medicare premium increases have a direct impact on COLA amounts. The Part B premium usually is deducted from Social Security benefits, so the dollar amount of that change reduces COLA amounts.
“Older adults, especially seniors on Social Security, are experiencing higher costs on everything,” said Bill Sweeney, AARP’s senior vice president for government affairs. “But we also know that their cost of health care and prescription drugs tends to go faster even than inflation, and so those folks are constantly telling us that they are really struggling to make ends meet.”
Medicare’s trustees have projected that the monthly Part B premium will rise $6.60 in 2027 to $209.50. The final figure will be released this fall, but if the projection holds, most beneficiaries will receive net COLAs of 3 percent or more. For example, the average monthly retirement benefit was $2,085 in July, so a 3.6 percent increase of $75.06 minus $6.60 would result in a 3.28 percent boost.
Many seniors also will see additional Medicare cost increases in 2027 because of changes in the Part D prescription drug program. The Trump administration announced in July that it would not continue a Biden-era program aimed at moderating Part D premium increases in 2027 by paying subsidies to plan providers.
“I think it’s fair to say that premium increases will be larger than they otherwise would have been if the premium subsidies had been continued,” said Juliette Cubanski, vice president and director of the program on Medicare policy at KFF, the health care research nonprofit.
A spokesman for the Centers for Medicare and Medicaid Services noted that the subsidies were intended as a temporary measure to “address market instability,” adding that for “most Medicare beneficiaries who decide to stick with their current plan, premiums will go down, stay the same, or increase by less than $10.”
Other COLA forecasts released Friday morning varied from the AARP prediction. The Committee for a Responsible Federal Budget forecast a 3.4 percent COLA, and the Senior Citizens League projects a 3.5 percent increase. Forecasts can vary depending on the inflation forecast source used for the September figures that will be released next month.
The COLA will be applied to benefits starting in January for 75.7 million retirees and their spouses who received Social Security, as well as those who receive disability benefits and Supplemental Security Income.
The Social Security Administration will start notifying recipients about their new benefit amounts by mail and online in early December.
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