Bill Sweeney, AARP’s senior vice president of government affairs, on the Social Security COLA for 2027.
The Social Security Administration (SSA) revealed last month the annual cost-of-living adjustment (COLA) for 2027, which will give a boost to beneficiaries’ monthly checks amid stubborn inflation.
The COLA will boost benefit checks by 3.6% in 2027, starting with payments distributed for January. That increase will amount to an average benefit boost of $75 per month for typical beneficiaries.
Each year, the COLA is computed to account for inflation that occurred in the third quarter of the preceding year, and this year’s inflation data from the months of July, August and September led to the 3.6% increase.
Bill Sweeney, senior vice president of government affairs at AARP, spoke with FOX Business and said that for the “vast majority of Americans, their Social Security is kind of the only thing in their retirement portfolio that is inflation-adjusted, and so it becomes really important for retirees, especially as they get older.”
SOCIAL SECURITY ANNOUNCES COST-OF-LIVING ADJUSTMENT FOR 2027
Social Security’s annual COLA for 2027 will be 3.6%. (Jim West/UCG/Universal Images Group via Getty Images)
Sweeney said that the COLA is particularly important for older retirees to allow their budgets to keep pace with prices.
“This cost-of-living adjustment – it may not matter as much when you’re 67 or 68 – but as you get into your 70s and 80s when it’s no longer realistic for you to go back to work if you need to sort of fill in your budget, the COLA really does make sure that Social Security keeps up with rising costs,” he said.
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Social Security and private savings play a crucial role in retirement savings given the decline in pensions. (Mark Felix/The Washington Post)
Historically, pension plans were a bigger part of Americans’ financial outlook, but as those have declined in recent decades, private savings and Social Security benefits are playing an increasingly important role in retirement planning.
“We used to talk about a three-legged stool of retirement security, which was your pension, your private savings and Social Security,” Sweeney said. “The Gen Xers are the first generation really retiring with only those two stool legs left.”
He said that “about half of people rely on Social Security for almost all of their income,” adding that “about 20%, almost all of their income is Social Security, and so this COLA is really important for this group, especially for whom this is the difference between putting food on the table or not.”
ONE TYPE OF SOCIAL SECURITY ADJUSTMENT COULD CUT THE 75-YEAR SHORTFALL IN HALF
Social Security’s annual COLA boosts benefits for the following year when inflation rises in the current year. (Getty Images/stock)
The 2027 COLA will be the largest since 2023, when benefits got an 8.7% boost to account for the spike in inflation that had occurred.
As inflation eased in the past three years, the COLA shrank accordingly and came in at 3.2% in 2024, 2.5% in 2025 and 2.8% in 2026.
“Social Security’s cost-of-living adjustment is really critical to making sure that in years of high inflation, you don’t fall behind,” Sweeney said.
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