Cheryl Casone discusses the July CPI inflation report, which was in line with expectations. It highlighted a drop in energy and gasoline prices as stock futures rise and the Labor Department releases new economic data. Social Security beneficiaries are still expected to see a larger cost-of-living adjustment (COLA) in 2027 than this year, although it has decreased as inflation eased in July. By law, the annual Social Security COLA is calculated using consumer price index (CPI) inflation data from the Bureau of Labor Statistics for the months of July, August, and September, based on a variant of the data set known as CPI-W. The COLA increases beneficiary payments to offset an increase in the cost of living, and the COLA for 2026 amounted to a 2.8% increase. The BLS released CPI inflation data for July on Wednesday that showed consumer prices rose 3.4% from a year ago. That’s down from an annual reading of 3.5% in June. Several groups have released estimates for the 2027 COLA based on July data and estimates for the next two months of data, which put the COLA landing in a range of 3.2% to 3.6%. INFLATION COOLED IN JULY BUT REMAINED ELEVATED AS THE FED WITHSTANDS RATE HIGS The nonpartisan Committee for a Responsible Federal Budget released the lowest of those estimates, projecting that the COLA will ultimately be at 3.2% when final data is released this fall. He noted in his analysis that the CPI-W remained stable in July and increased 3.4% over the last year. “High COLAs may provide useful short-term support to seniors, but they also impose significant costs on a Social Security retirement fund that is just six years from insolvency,” CRFB said, adding that automatic 22% benefit cuts would occur if the fund is depleted. CRFB has proposed reforms to COLAs intended to help shore up Social Security’s solvency, including a COLA cap. for high-income beneficiaries, as well as a fixed-rate COLA. ONE KIND OF SOCIAL SECURITY ADJUSTMENT COULD HALF THE 75-YEAR DEFICIT The Social Security COLA for 2027 is estimated at between 3.2% and 3.6%, with approximately two months left until the official COLA is finalized. (Getty Images/stock) AARP, which advocates for policies it sees as beneficial to people over 50, estimates the 2027 COLA will be 3.5% in its first COLA estimate to be released before third-quarter inflation reports come out. [increase next year]”There is a lot of uncertainty about how food and especially energy prices will develop over the next two months. This is not set in stone.” NEW PROPOSAL WOULD LIMIT SOCIAL SECURITY BENEFITS TO $100K FOR WEALTHY COUPLES A woman walks into a Social Security office in Houston, Texas, on July 13, 2022. (Mark Felix/The Washington Post/Getty Images)The Senior Citizens League (TSCL) released an estimate putting the 2027 COLA at 3.6%, which would represent an increase of 0.8 percent points compared to the 2026 COLA. TSCL’s analysis noted that if the estimated COLA were to take effect today, it would equate to a $69.75 increase in average benefits, rising to $2,007.28 from $1,937.53. TSCL CEO Shannon Benton said in a statement that “One of the wild cards in this year’s forecast has been the volatility of inflation. It started the year at 2.2%, then rose to 4.4% in May before falling again to 3.5% in June.” “That kind of instability can throw off forecasts, but our model is designed to avoid chasing every peak and every dip, which has kept our predictions on a relatively stable course,” Benton added. The CPI inflation data will come into force as of payments to beneficiaries in January.
