Social Security COLA estimate for 2027 slips as inflation cools

Social Security recipients may be looking at a smaller 2027 benefit increase than some analysts expected a month ago, after June inflation came in cooler than forecast. For retirees and other beneficiaries, the cost-of-living adjustment, or COLA, affects the size of monthly checks and can shape household budgets alongside Medicare costs.

Mary Johnson, an independent Social Security and Medicare analyst, now estimates the 2027 Social Security COLA at 3.7%. That is down from her 4.7% estimate last month, according to CNBC.

Johnson said in a statement that June showed a “significant drop in inflation” and one rarely seen in June consumer price index data during the past five years.

The consumer price index, a government measure of what consumers pay for goods and services, rose 3.5% over the 12 months through June, according to government data released Tuesday and cited by CNBC. The reading came in below expectations as energy prices fell.

The Senior Citizens League, a nonpartisan senior group, kept its own 2027 COLA estimate at 3.8%, unchanged from last month.

How the Social Security COLA works

Social Security’s annual COLA is designed to help benefits keep up with inflation. When prices rise, the adjustment increases monthly benefits so recipients do not lose as much purchasing power.

The Social Security Administration typically announces the official COLA for the next year in October. Until then, projections can move as inflation data changes.

The annual COLA has averaged 3.1% over the past 10 years, according to the Social Security Administration. In 2026, more than 75 million Social Security and Supplemental Security Income beneficiaries received a 2.8% benefit increase.

The COLA is especially relevant for retirees because many face higher costs in categories that can take up a large share of fixed incomes. A January survey by the Employee Benefit Research Institute and Greenwald Research found retiree confidence fell 5 percentage points to 73%. The survey included 1,045 retired individuals.

According to the survey results, retirees listed inflation, debt, health care costs, housing expenses and possible retirement system changes among their top concerns. Two in five retirees said their health care costs were higher than expected.

Medicare costs are part of the picture

Medicare premiums can offset part of a Social Security increase for some retirees, since certain premiums are often deducted from benefit checks.

The standard Medicare Part B premium, which covers medically necessary and preventive services, is estimated at $209.50 per month in 2027, according to the annual Medicare trustees report released in June. The 2026 monthly premium is $202.90. Higher-income beneficiaries may owe additional surcharges.

Johnson described that level of change as “relatively low,” saying the average Part B increase has usually been about 5.4% per year over the past decade.

For Medicare Part D, which covers prescription drugs, the initial deductible will be $700 in 2027, up from $615 in 2026, according to the trustees report. The catastrophic threshold, or the out-of-pocket spending limit, will be $2,400 next year, compared with $2,100 in 2026. Those thresholds have been finalized, according to the report.

For now, the 2027 Social Security increase remains an estimate. The final number will depend on the inflation data used by the Social Security Administration before its October announcement.

This story draws on original reporting from CNBC.