Social Security’s 2027 COLA may be lower than expected — how to prepare early

Every year, retirees get a small increase in Social Security money, called a cost-of-living adjustment (COLA), which depends on inflation data. COLA is calculated using yearly changes in the Consumer Price Index during the third quarter. The 2026 COLA increase was only 2.8%, which added about $56 per month on average to benefits.

Inflation is slowing, and experts say this could make future increases even smaller, as per GOBankingRates. A senior group predicts the 2027 COLA may drop to about 2.5%. The final official COLA number for 2027 will only be announced in October 2026.

Why a smaller COLA can be a problem

Even though lower inflation sounds good, COLA increases often do not fully match retirees’ real expenses. This happens because the government uses a price index based on urban workers, not retirees. Many retirees are not wage workers and may not live in cities, so the calculation may not reflect their true costs. Big expenses like housing and healthcare usually rise faster than overall inflation. Retirees spend a bigger share of income on these essentials than younger people.

How people can prepare early for a smaller COLA

Experts say preparing early can help retirees manage expenses if their increase is small. Retirees can try to increase income — early retirees can earn $24,480 yearly without benefit cuts in 2026. The earning limit rises to $65,160 in the year someone reaches full retirement age, as noted by GOBankingRates.

Benefit deductions stop completely once a person turns 67. Cutting unnecessary expenses like unused subscriptions can help save money. Making small changes in spending can save money over time. For example, choosing cheaper streaming plans can help. It is also good to compare prices for things like insurance, electricity, and phone bills to pay less.

Older people should check for special discounts from shops and services. Saving some money for emergencies is important because it can help when unexpected costs come or when COLA increases are low. Experts also suggest saving separately for Medicare costs because premium hikes can cancel out COLA gains.

FAQs

Q1. Why may Social Security COLA be lower in 2027?

Slower inflation and expert estimates suggest the 2027 COLA could be smaller than recent increases.

Q2. When will the 2027 Social Security COLA be announced?

The official 2027 COLA number is expected to be announced in October 2026.