September <a s 2027 Cost-of-Living Adjustment (COLA)
We have finally arrived at what is arguably the most anticipated day for Social Security: the official announcement of the cost-of-living adjustment (COLA). The only other date that might rival this is the day the adjustment actually takes effect in January.
Beginning next year, let’s examine how we arrived at this above-average COLA.
The inflation metric for the country, and in September, it rose 3.7% compared to a year ago. However, Social Security relies on the CPI-W to determine the annual COLA. This inflation index focuses specifically on the expenditures of hourly wage earners and administrative workers, representing roughly 30% of the total U.S. population.
In September, the CPI-W climbed 3.9% from the previous year, marking its second-largest year-over-year increase of the year, trailing only the 4.4% surge seen in May.
The variance between the CPI-U and CPI-W figures stems from the different weightings assigned to various expenses. The CPI-W places greater emphasis on costs such as rent, transportation, food and beverages, clothing, and fuel.
For those who have had to pay utility bills or fill up their gas tanks, this increase is likely not a surprise. Inflation had briefly moderated in July and August—with the CPI-W rising 3.4% and 3.5%, respectively—but renewed geopolitical tensions caused it to accelerate once more in September. July, August, and September are significant because the COLA is determined based on the inflation data from these three months, which comprise the third quarter.
