COLA Estimate Drop
Based on the latest data from the Senior Citizens League, the Social Security cost-of-living adjustment (COLA) forecast dropped by 0.2% in July (from a 3.8% COLA increase in June to a 3.6% projection for July). This projection would result in an average Social Security benefit increase of about $75 per beneficiary. Many forecasters predict that the COLA could change depending on whether oil prices drop ahead of the official October release. The COLA projection jumped significantly from 2.8% in March to 3.9% in April and has held relatively steady since that point. While inflation generally fell from 3.5% to 3.4% in July, the index for housing (shelter) rose by 0.1% and the index for food also increased by 0.1%.
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about the projected drop in the Social Security COLA for 2027.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: This latest projection reflects the fact that the Trump administration is succeeding in its mission to get inflation under control. Oil prices are down--not below their levels prior to the conflict in Iran, but they're down from the highs that we saw earlier in the conflict. The U.S. actions to retake control of the Strait of Hormuz are working and it's only a matter of time before oil prices drop significantly.
Bloink: We're currently dealing with a wildly unpredictable situation when it comes to inflation--which has remained perpetually high under the second Trump administration. This most recent dip in the projected COLA increase is not an accurate reflection of the current state of the market, in terms of price increases--and this is a systemic problem, not one that's isolated to this year alone.
______________________________________________________
Byrnes: Social Security COLA predictions are just that--projections. They take into account many different factors that are relevant to determining the prices and expenses that ordinary Social Security beneficiaries are likely to face in the coming year. A drop in COLA projections is merely a reflection of the fact that current policies are working toward easing inflation and reducing prices for the year ahead. This is why we adjust the amounts each year in the first place.
Bloink: COLA increases should take likely future monetary challenges into account. This conflict with Iran has no end in sight and the system should recognize that oil prices are likely to remain high--and even increase--over the coming year as we continue to deal with the fallout of this foreign war. Prices for food and basic necessities also remain stubbornly high and there's no reason to suspect that these prices likely to decrease anytime soon.
______________________________________________________
Byrnes: COLA increases consider a wide range of issues. The system is designed to reflect the reality that beneficiaries are facing when the increase is put into place. The current decrease merely reflects the reality that inflation is easing and is projected to continue to ease over the remainder of 2026 and well into 2027.
Bloink: We also have to remember that Medicare premiums will be increasing as well, eating into a greater portion of most Social Security beneficiaries' monthly checks. The current COLA projections simply don't go far enough to address the issues and challenges that seniors today are faced with and are likely to be faced with in the year ahead.