As the Social Security Administration (SSA) prepares to announce its upcoming cost-of-living adjustment (COLA), experts anticipate that the increase scheduled for 2027 will mark the most significant rise in benefits in four years. Despite this projected boost, the expected adjustment is still forecasted to fall considerably short of the largest COLA ever recorded since the adjustment mechanism was introduced over fifty years ago.
Understanding the COLA and Its Calculation
The COLA was established in 1975 under an amendment to the Social Security Act passed in 1972, designed to align SSA benefits with inflation. This annual adjustment affects monthly payments across Social Security retirement, disability, survivor benefits, and the Supplemental Security Income (SSI) program.
The calculation of the COLA hinges on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a metric compiled by the U.S. Bureau of Labor Statistics that tracks price fluctuations in key consumer goods and services, including housing, food, and transportation. The SSA compares the CPI-W values from July, August, and September of the current year against those of the previous year. If this comparison reveals a positive increase, that percentage is applied as the COLA for the subsequent year.
For instance, in the fall of 2025, the SSA announced a 2.8% increase in Social Security and SSI benefits for that year, following its assessment of CPI-W data. Consequently, at the start of 2026, retired workers—the largest group of Social Security beneficiaries—saw their monthly payments adjusted accordingly.