Could Social Security's 2027 COLA Be Lower Than 2026's? Here's the Truth.

Written by Maurie Backman for The Motley Fool

Current estimates are calling for a Social Security COLA in the 3.4% to 3.6% range.

If inflation cools substantially in August and September, it could lead to a smaller COLA in 2027.

It's important not to get hung up on estimates until next year's COLA becomes official, which won't happen until October.

If you're on Social Security, there's a big number you're probably keeping an eye on -- the 2027 cost-of-living adjustment, or COLA.

Earlier this year, Social Security benefits got a 2.8% COLA. And many people are hoping next year's raise will be much more generous.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

So far, estimates are, in fact, pointing to a larger COLA in 2027. But it's not a given that next year's raise will be larger than 2026's. And it's important not to count on any specific COLA until the Social Security Administration makes one official.

The most recent Social Security COLA estimates indicate that next year's raise could be significantly higher than 2.8%.

The Senior Citizens League, an advocacy group, projects that next year's COLA will be 3.6%. Mary Johnson, an independent Social Security analyst, is calling for a 3.4% COLA in 2027.

Both the Senior Citizens League and Johnson lowered their COLA projections following a cooler inflation report in July. What this means, though, is that if inflation continues to slow down in August and September, it could set the stage for a smaller COLA in 2027.

Now, for next year's COLA to come in lower than 2026's, inflation would have to cool substantially. Given recent numbers, it's unlikely that 2027's COLA will be below 2.8% -- but it is possible.

Social Security COLAs are based on inflation data from July, August, and September. Given that we only have one-third of that data already, it's soon to be making financial plans based on any specific raise.

If you create a 2027 budget around a 3.4% COLA, for example, and next year's raise ends up being just 3.1%, it could throw your numbers out of whack. So a better bet is to build a flexible budget until the SSA makes an official COLA announcement and that number is locked in.

That announcement is expected to happen on Oct. 14 unless something happens to delay September's inflation report. Last year, a government shutdown forced the SSA to postpone its COLA announcement, but hopefully the same thing won't happen this time around.

Once you see what the actual number looks like, you can apply that COLA to your specific benefit to see what sort of boost you may be looking at. Just keep in mind that if the cost of Medicare Part B goes up and you're enrolled in Medicare, you can expect less of a net COLA since that premium gets paid out of your monthly Social Security check.

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.

One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.

The Motley Fool has a disclosure policy.