Let’s take a look at why that has good and bad implications for Social Security<\/a> recipients. <\/p>\n The annual COLA<\/a> is set by examining changes in the CPI-W, but only the third-quarter (July, August, September) data matters. Here is how it works: <\/p>\n Social Security averages CPI-W numbers for this year’s third quarter (Q3). <\/p>\n<\/li>\n The current year’s average is compared to the previous year’s average. <\/p>\n<\/li>\n The upcoming COLA is set as the percentage increase, rounded to the nearest tenth of a percentage. If this year’s CPI-W average is the same as or less than last year’s, there’s no COLA. <\/p>\n<\/li>\n<\/ol>\n So, July’s CPI-W numbers (327.104) will be one of three CPI-W data points used to calculate the 2027 COLA. If, for example, August and September’s CPI-W numbers also come in up 3.4% year over year, you could expect next year’s COLA to be 3.4%. <\/p>\n The bad news about the 2027 COLA <\/p>\n We won’t know the official COLA until the Social Security Administration releases it on Oct. 14, but one thing is almost certain: Social Security recipients will continue to lose purchasing power. <\/p>\n According to senior advocacy group The Senior Citizens League (TSCL), Social Security benefits have lost 13.7% of their purchasing power in the past decade. That means $1,000 in benefits then would only buy around $860 worth of things today. <\/p>\n Part of the issue is that the CPI-W doesn’t fully reflect the expenses that retirees face. It measures changes in prices of goods and services like food, transportation, housing, clothing, energy, and healthcare. However, expenses like healthcare and housing are typically more relevant to retirees than clothing or gasoline. <\/p>\n One proposed solution is to use the Consumer Price Index for Americans 62 years of age and older (R-CPI-E), which gives more weight to expenses seniors face more often. For now, though, that’s simply a “suggestion,” and the CPI-W remains the go-to, so retirees should anticipate declines in their purchasing power and adjust their budgets accordingly. <\/p>\n The\u00a0$23,760\u00a0Social Security bonus most retirees completely overlook <\/p>\n If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known\u00a0“Social Security secrets”<\/strong><\/a> could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $23,760 more<\/strong>… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. <\/p>\n Many Americans leave money on the table in retirement. Learn more about these retirement strategies and more, available when you join Stock Advisor. <\/p>\n View the “Social Security secrets” \u00bb<\/strong><\/a> <\/p>\n The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Image source: Getty Images. Why July’s inflation numbers matter <\/p>\n
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