A higher COLA boost may be needed, given the high costs of common commodities such as oil, gas, utilities, and groceries. According to the Senior Citizens League, which recently called for a 3.9 percent 2027 Social Security COLA hike, estimates that SSA recipients have lost 13.7 percent of their buying power in the last 10 years. At 3.9 percent, the average benefits check for retired workers would increase by $81.17, from $2,081.16 to $2,162.33.
Here’s what you need to know about COLA
COLA stands for "Cost-of-Living Adjustment," and in simple terms, it's meant to help Social Security benefits keep up with inflation.“When everyday expenses go up - groceries, rent, utilities, health care—Social Security payments are adjusted, so retirees and other recipients don't lose as much purchasing power over time,” Steve Sexton, CEO of Sexton Advisory Group, told NTD News.
“A lot of people assume these increases are random or decided each year politically, but they're actually tied to inflation data. So when inflation runs hot, COLA tends to be higher. When prices stabilize, the increases are usually smaller.”
Here’s what’s driving the push for a higher 2027 COLA hike
A 4.2 percent COLA figure may be much higher than expected, but it’s needed, Sexton said.“A projected 4.2 percent COLA is definitely on the larger side historically, and it's really being driven by the fact that Americans are still dealing with stubborn inflation in a lot of areas that hit retirees especially hard,” he noted. “Even though headline inflation has cooled from the peaks we saw a few years ago, many everyday costs are still noticeably higher. Costs for insurance, medical expenses, food, housing, and utilities haven’t exactly gone back down.”
SSA recipients shouldn’t expect a big COLA boost every year
Americans counting on a big annual Social Security COLA hike are likely to be disappointed.“Historically, we have seen a wide range of COLA adjustments, but they are always rooted in underlying inflation in the U.S. If we see a big uptick in inflation, that may very well translate into a higher COLA announcement,” Alex Dansberger, a financial adviser at Wealth Enhancement Group, told NTD. “Vice versa, in extremely low inflation years like we saw in 2008, 2009, and 2015, you may see no Cost of Living Adjustment at all.”
The variability here is why monitoring COLA announcements or working with a financial advisor is so important. “That way, you can be better prepared for how these annual changes may impact your long-term plan,” Dansberger added.