Key Points

• It's terrific that Social Security adjusts retiree benefits to account for inflation.

• But Social Security is facing a shortfall, and that could end up shrinking benefits.

• The $23,760 Social Security bonus most retirees completely overlook ›

October is approaching, and that means many people are looking forward to leaves changing color in their neighborhoods and to trick-or-treaters gracing their doorsteps. Social Security enthusiasts, though, are also eagerly waiting to find out how big the Social Security cost-of-living adjustment (COLA) will be for 2027.

It's all tied to inflation, of course, and a fluctuating inflation rate has experts revising their COLA estimates. A key source of COLA estimates is the Senior Citizens League, which recently dropped its estimate for the 2027 cost of living adjustment (COLA) from 3.6% to 3.5%.

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Here's a closer look at COLAs and at what they mean for retirees.

The scoop on COLAs

The most recent COLA, announced in late 2025 for 2026, was 2.8%. Here are some that preceded it:

It's actually super important for Social Security beneficiaries to get these nearly annual increases -- because without them, the buying power of their nest eggs could fall by half or more over 25 years.

But the increases are problematic -- because they're based on a sub-optimal measure of inflation instead of a more appropriate one. Specifically, the increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) -- a measure focused on the common spending patterns of workers, not retirees.

It would be far more logical to base increases on the Consumer Price Index for the Elderly (CPI-E), which weighs categories such as healthcare more heavily. After all, healthcare spending in retirement can be a major expense.

What it means for retirees

So, whether the upcoming increase is 3.5% or more or less, what does it mean for retirees? Here are some things for them to know:

• Assuming a 3.5% hike, you can multiply your monthly benefit by 1.035% to find out what your new benefit will be. So a $2,000 benefit will become a $2,070 one.
• This will help your income keep up with inflation -- to some degree. It might more than make up for inflation or it might be insufficient, depending on how you spend your money.

There are some things to worry about, though:

• Social Security's surplus has been shrinking, as it's been paying out more than it has been taking in. If nothing is done to strengthen the program, Social Security's trust funds' surplus will run out within a few years, and benefits will likely shrink to around 78% of the amount due to beneficiaries. That would turn a $2,000 benefit into a $1,560 one -- and would wipe out any benefit from a COLA.
• Fortunately, there are multiple ways to fix Social Security -- some good, some less so. One recently proposed way, suggested by the Committee for a Responsible Federal Budget (CRFB), seems terrible to me: instituting a flat-rate COLA for Social Security. The way they propose structuring it would have about 80% of recipients getting a smaller increase than they otherwise would have received.

Take the time to keep up with social Security developments, because they may have a big effect on your future financial security.

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