2027 Social Security Payment Increase: Retirees Could Get $70 More a Month, but Critics Say It's Not Enough

Millions of Americans who receive Social Security retirement benefits could see a larger monthly payment in 2027 if current forecasts prove accurate. However, campaign groups representing older people argue that the projected increase will still fall short of meeting many retirees' everyday living costs.

Several organisations have released forecasts for next year's cost-of-living adjustment, known as COLA. Estimates range from 3.6% to 3.8%. If the highest projection proves correct, the average retired worker would receive about $73.62 more each month, increasing the average monthly benefit to $2,011.15.

Despite the expected increase, The Senior Citizens' League says the average payment would remain almost $700 below the estimated $2,700 a month that many older Americans need to cover basic living expenses.

The organisation has renewed its call for Congress and the president to increase Social Security benefits and reconsider the way annual payment increases are calculated.

Forecasts Point to Higher Payments

The American Association of Retired Persons, known as AARP, analysed July inflation data and projected a 3.6% increase in Social Security benefits for 2027. Independent Social Security analyst Mary Johnson forecast a slightly higher increase of 3.7%.

The Senior Citizens' League published the highest estimate through its COLA Watch, projecting a 3.8% increase. According to the organisation, that would increase the average monthly retirement benefit by $73.62. Even with that rise, it said many retirees would continue to face a gap between their income and living costs.

How the Current Formula Works

The Social Security Administration calculates annual cost-of-living adjustments using the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. The index is produced by the US Bureau of Labor Statistics. It measures changes in the prices of a basket of goods and services, including housing, food, transport, and clothing.

Each autumn, the Social Security Administration compares the average CPI-W recorded during July, August, and September with the same three-month period a year earlier. If the index rises, Social Security benefits increase by the same percentage from the following January. If it remains unchanged or falls, payments stay the same. Benefits are not reduced.

Why Campaigners Want a Different Measure

The Senior Citizens' League wants annual Social Security increases to be calculated using the Consumer Price Index for the Elderly, known as CPI-E. The US Bureau of Labor Statistics introduced CPI-E in 1987 as an experimental index designed to reflect the spending patterns of older Americans. The index gives greater weight to categories such as housing and healthcare, where retirees often spend a larger share of their income.

Rich Johnson, Vice President of Financial Security at the AARP Public Policy Institute, told Yahoo News that the current COLA does not always reflect the spending patterns of Social Security beneficiaries. He said people aged 62 and older generally spend more on housing and medical care than urban wage earners, while spending less on transport, clothing, and some other categories. Johnson also said CPI-E generally rises faster than CPI-W because it gives greater weight to categories that often experience higher inflation.

He added that if COLA had been based on CPI-E instead of CPI-W between 1986 and 2025, annual increases would have been higher in all but eight years. Although the average annual difference was around 0.2 percentage points, Johnson said those yearly increases would have accumulated over time. He estimated that someone who began receiving benefits in 1986 would have received payments that were about 8.1% higher by 2025.

Why CPI-E Has Not Been Adopted

Although CPI-E has existed for nearly four decades, it remains an experimental measure. Rich Johnson said its experimental status is one reason it has not been adopted for calculating Social Security cost-of-living adjustments.

The index is based on a smaller sample than CPI-W, making it potentially more vulnerable to statistical errors. The Congressional Budget Office has also questioned some of the assumptions behind CPI-E. It has noted that the measure assigns a larger share of spending to housing even though many retirees have already paid off their mortgages. The Social Security Administration continues to calculate annual cost-of-living adjustments using CPI-W.

Pressure for Reform Continues

The Senior Citizens' League says many retirees continue to face financial challenges despite annual payment increases. Executive Director Shannon Benton said in July that poverty among older Americans was increasing and that many seniors were delaying medical appointments because of rising costs.

Benton also said a 3.8% cost-of-living adjustment would still not close the gap between what many retirees receive and what they need to live with dignity. The Social Security Administration has been contacted for comment.