Social Security beneficiaries are expected to see a larger cost-of-living adjustment (COLA) next year amid rising inflation, according to new reports.
An analysis by The Senior Citizens League (TSCL) predicts that the 2027 COLA will be 3.9%, which would represent an increase of 1.1 percentage points from this year’s 2.8% COLA. TSCL’s previous prediction for the 2027 COLA was 2.8% in its February and March estimates.
TSCL estimates that the average Social Security benefits check for retired workers would rise by $81.17, up from $2,081.16 to $2,162.33.
“Many seniors are telling us the same thing: As inflation picks back up, life still does not feel affordable. The average senior already lives on much less than younger Americans, according to the Census Bureau, and our supporters constantly tell us they feel like they’re falling farther and farther behind,” said TSCL Executive Director Shannon Benton.
The report noted that pressure from elevated oil prices could push inflation even higher, as energy prices impact household budgets directly and through higher transportation costs for other goods.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated that the 2027 COLA will be 3.8% based on the latest inflation data – slightly lower than the TSCL’s estimate.
CRFB notes that depending on inflation data over the next five months, the COLA will likely end up somewhere in a range between 3% and 4.5%.
SOCIAL SECURITY’S MAIN TRUST FUND FACES DEPLETION IN 2032, TRIGGERING AUTOMATIC BENEFIT CUTS
It also cautioned that if wages don’t rise in response to the ongoing rise in inflation, it will widen Social Security’s budget deficit and accelerate the insolvency of a key trust fund.
“If the recent spike in inflation boosts the COLA to 3.8% without increasing wages, we estimate it would worsen Social Security’s shortfall by roughly $300 billion over the next decade and advance the insolvency of the old age trust fund by three months from late 2032 to earlier in the year,” CRFB noted.
NEW PROPOSAL WOULD CAP SOCIAL SECURITY BENEFITS AT $100K FOR WEALTHY COUPLES
Once the trust fund is depleted, the Social Security Administration will be required by law to cut benefits to match incoming payroll tax revenues, which CRFB estimates will result in a 25% cut for beneficiaries and would “erase almost a decade’s worth of COLA increases.”
CRFB has offered a number of proposals aimed at improving Social Security’s solvency, including a cap on COLAs for those with the largest benefits and highest lifetime incomes that would be capped to match the benefits paid to middle and high earners.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The group has also proposed a six-figure limit, which would cap total benefits for wealthy couples at $100,000 or individuals at $50,000; as well as an employer compensation tax that would apply a flat tax rate to all employer compensation costs – including wages and fringe benefits like health insurance and stock options.