Bill Sweeney, AARP senior vice president of government affairs, on the 2027 Social Security COLA.
The Social Security Administration (SSA) last month unveiled the annual cost of living adjustment (COLA) for 2027, which will provide a boost to beneficiaries’ monthly checks amid stubborn inflation.
The COLA will increase benefit checks by 3.6% in 2027, starting with payments distributed for January. This increase will equate to an average benefit increase of $75 per month for typical beneficiaries.
Each year, the COLA is calculated to account for inflation that occurred in the third quarter of the previous year, and this year’s inflation data for July, August and September led to an increase of 3.6%.
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 sort of the only thing in their retirement portfolio that is adjusted for inflation, and so that becomes very important for retirees, especially as they get older.”
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Social Security’s annual COLA for 2027 will be 3.6%. (Jim West/UCG/Universal Images Group via Getty Images)
Sweeney said the COLA is especially important for older retirees to allow their budgets to keep pace with prices.
“That cost of living adjustment — it may not matter as much when you’re 67 or 68 — but as you get to 70 or 80 and it’s no longer realistic for you to go back to work if you need to fill your budget, the COLA really ensures 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. (Marc Félix/The Washington Post)
Historically, retirement plans represented a larger part of Americans’ financial outlook, but as they 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 for retirement security, which was your pension, your private savings and Social Security,” Sweeney said. “Generation X is the first generation to actually retire with just these two stool legs.”
He said that “about half of people rely on Social Security for almost all of their income,” adding that “about 20 percent, almost all of their income comes from Social Security, and so this COLA is really important for that group, especially for whom it’s the difference between putting food on the table or not.”
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The annual Social Security COLA increases benefits for the following year when inflation increases in the current year. (Getty Images/stock)
The 2027 COLA will be the largest since 2023, when benefits received an 8.7% increase to account for the surge in inflation that occurred.
As inflation has eased over the past three years, the COLA has declined accordingly to 3.2% in 2024, 2.5% in 2025, and 2.8% in 2026.
“The Social Security cost of living adjustment is really critical to ensuring that during years of high inflation, you don’t fall behind,” Sweeney said.
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