Millions of people receiving Social Security now have a clearer understanding of the potential size of their 2027 cost-of-living adjustment (COLA). The federal government released the second of three inflation readings used to calculate next year’s increase.
Understanding CPI-W
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose by 3.5 percent for the 12 months ending in August, according to the Bureau of Labor Statistics. The CPI-W hit an index level of 328.481 in August. This index is crucial for Social Security since it calculates the annual COLA, unlike the broader Consumer Price Index for All Urban Consumers (CPI-U).
The CPI-U increased by 0.4 percent in August from July, showing a 3.4 percent increase from the previous year. Friday’s figures initiated the final steps in calculating the 2027 COLA, with September’s CPI-W figure the last piece of the puzzle.
Significance for Beneficiaries
By July, more than 75.7 million people received Social Security, Supplemental Security Income, or both. The annual COLA is vital for beneficiaries, determining the payment increases that begin at the start of each new year as a response to consumer price rises.
The 2027 adjustment is particularly notable given the recent inflation acceleration. In July, CPI-W was 327.104, marking a 3.4 percent rise from July 2025. Social Security recipients got a 2.8 percent COLA for 2026 after receiving 2.5 percent in 2025 and 3.2 percent in 2024.
The Senior Citizens League projected a 3.6 percent COLA for 2027, revising its earlier predictions from June and July. Its new forecast aligns with July’s 3.4 percent CPI-W annual increase.
CPI-W’s Role in COLA Calculations
This year’s CPI-W inflation rate reported on Friday differs from the final Social Security COLA. Federal law calculates the adjustment by averaging the CPI-W for July, August, and September and comparing it with those same months in the last COLA-effective year.
For the 2027 COLA, the comparison base is the third quarter of 2025. CPI-W figures for July, August, and September 2025 produced an average of 317.265, resulting in a 2.8 percent COLA for 2026. The July 2026 CPI-W reading was 327.104, with August’s update now included. September’s figure will complete the three-month average necessary for precisely setting next year’s COLA.
Projections and Waiting
The Committee for a Responsible Federal Budget (CRFB) anticipates a 3.4 percent COLA next year, based on current inflation data. This prediction is 0.6 percentage points higher than 2026’s increase.
For example, if the 2027 COLA matches the 3.45 percent average of July’s 3.4 percent and August’s 3.5 percent CPI-W readings, the average retired worker benefit would increase by around $71.97 monthly, or $863.60 annually.
The typical retired worker currently receives $2,085.98 monthly. A 3.45 percent adjustment would enhance this to about $2,157.95 per month, totaling $25,895.36 annually.
The Final Steps
Recipients must await the next inflation report from the Bureau of Labor Statistics (BLS), scheduled for October 14. This report contains the final CPI-W number needed for calculation. The Social Security Administration will announce the official 2027 COLA the same day.
The new adjustment will apply to payments starting in January 2027 for benefits payable in December 2026. Supplemental Security Income (SSI) payments will also adjust according to the annual COLA.
Contact Newsweek editors on this story: Daniel Orton and Sam Wilson.