First 2027 Social Security COLA forecasts a small bump at 2.5%. But early predictions are often incorrect. Here’s what retirees should watch instead

It’s important to remember that this is an estimate, not a concrete number. And 2027 is a long way off still. This estimate is built on inflation data that doesn’t exist yet, and could change before the actual COLA is determined.

Here’s why COLA projections can miss the mark, and what you should watch for instead.

Why early COLA projections can miss the mark

Social Security COLAs are based on inflation data from the third quarter of the year, July through September, using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (3). That means projections made early in the year are missing most of the data that actually determines the final adjustment.

Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek, “The COLA formula relies on Q3 inflation data (July-September CPI-W), and we haven't even hit February yet,” adding, “Last year, forecasters predicted 2.2 percent for 2026 back in March 2025, then 2.5 percent in June, before the actual number came in at 2.8 percent. The predictions chase the data, not the other way around” (2).

Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, echoed that skepticism: “The only thing I can predict right now is that the COLA estimate will likely not be accurate. I would take these numbers with a grain of salt. There is still a meaningful amount of data that needs to be processed, and the missing October CPI data alone could materially change the calculation” (2).

In other words, what looks like a modest bump today could end up looking different by the time the Social Security Administration announces the official COLA in October.

Even if COLA increases come in close to the estimate, retirees may not even feel a difference because of how inflation is measured.

Social Security uses CPI-W, which is based on the spending patterns of working-age households. This gives more weight to things like commuting costs and clothing, and less to healthcare, an expense that takes up a larger share of seniors’ budgets (4). Healthcare costs can quickly cut into any COLA adjustments.

“The real story is the squeeze,” Ryan told Newsweek, “Even if seniors get 2.5 percent in 2027, Medicare Part B premiums already ate most of 2026's increase, rising 9.7 percent versus the 2.8 percent COLA… Research shows that if we used CPI-E, the 2024 COLA would've been 4 percent instead of 3.2 percent” (2).

The smaller projected increase also reflects a bigger trend: inflation has cooled significantly since its 2021–2022 peak. Prices are still rising which leads to smaller COLA adjustments.

Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said retirees should expect that moderation to continue, at least for now, saying, “As for right now, though, seniors should plan for a more moderate adjustment to their Social Security checks next year” (2).

What retirees should watch instead

COLA is meant to help retirees keep up with inflation, not outrun it, so other strategies are key to staying ahead of rising expenses.

Retirees are better off looking past early COLA projections and paying closer attention to the expenses that actually shape their monthly budgets.

Housing, utilities, insurance and out-of-pocket medical costs often rise faster than CPI-W inflation. Even a decent-sounding COLA can get eaten up quickly if Medicare premiums or other fixed expenses jump.