A “significant boost” will come to Social Security checks in 2027. Here’s what it could mean for your monthly check
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For many retirees living on a fixed income, rapid price increases (1) in the post-pandemic period have been difficult to absorb. In fact, as inflation soared, older generations saw their spending grow and lag behind other generations (2), and their discretionary spending fell below that of households overall.
But that could soon change. As reported by Bank of America (1), the One Big Beautiful Bill Act (3) has already provided a temporary income boost for many retirees because eligible seniors 65 and older can claim a new tax deduction of up to $6,000 per taxpayer through 2028. A lower tax bill means more money to spend on other things.
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Now, a coming change to Social Security in 2027 could provide even greater relief through a cost-of-living adjustment, or COLA. The COLA was announced in October and will take effect in January, resulting in a 3.6% benefit increase for all Social Security beneficiaries.
COLAs occur most years, but some groups believe they are not as effective as they should be in maintaining Social Security’s purchasing power. While COLAs are calculated using a consumer price index to try to ensure that benefits keep pace with inflation, the Senior Citizens League estimates that the formula is flawed and that the real purchasing power of benefits has declined by nearly 14% since 2016 (4).
But this year, the Bank of America Institute said the recently announced 3.6% increase could actually provide a “significant boost” in 2027. Given that the COLA is relatively high (tied for the fifth highest since the 1980s), if inflation eventually moderates as experts predict, benefit increases could actually outpace price growth.
In other words, the 3.6% benefit increase may not only help seniors avoid losing ground. This could help them gain traction, increase their purchasing power and potentially narrow their spending gap.
This should come as a welcome relief to older Americans, because if the prediction comes true, the extra wiggle room in their budget next year could allow them to make purchases they’ve been putting off.
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