The 2027 cost-of-living adjustment will not be announced until October 14, but the arithmetic behind it is already two-thirds complete. Understanding how that number gets built — and why one group of retirees will not receive all of it — matters more than any single forecast headline.
How the Quarter Actually Gets Measured
Social Security's COLA compares the average CPI-W reading for July, August and September of this year against the same three months of last year. July 2026 came in at 327.104. The third-quarter 2025 baseline was 317.265. That works out to a 3.10% increase, rounded to 3.1%.
Two of the three inputs are effectively set: July is published, and August's figure arrives in September. Only the September reading, published in October, remains genuinely unknown.
Why the Forecasts Disagree
If 3.1% is the running math, why do the headlines say 3.5% or 3.6%? Because those are different calculations. The Senior Citizens League's 3.6% projection and AARP's 3.5% estimate model what August and September inflation will add to the quarter. The 3.1% figure is what you get if the rest of the quarter looks exactly like July.
Both are legitimate. But they answer different questions, and the gap between them is forecast, not data. Independent analyst Mary Johnson's estimate has moved from 4.7% in June to 3.7% in July to 3.4% now — a reminder that projections drift substantially as actual readings replace assumptions.
The 3% Threshold That Changes Everything for FERS Retirees
Here is the part most coverage skips. Federal retirees under the Federal Employees Retirement System do not receive the same COLA as Social Security recipients. The Office of Personnel Management applies a tiered formula, informally called the "diet COLA":
- CPI increase of 2% or less: FERS retirees receive the full amount.
- Between 2% and 3%: FERS receives a flat 2%, regardless of the actual figure.
- Above 3%: FERS receives the full amount minus one percentage point.
At the current 3.1% projection, that third rule applies. Social Security and CSRS recipients would get 3.1%; FERS retirees would get 2.1%. This year showed the same pattern in the middle tier: CPI-W rose 2.8%, so CSRS and Social Security recipients received 2.8% while most FERS retirees received 2.0%.
FERS retirees should also note the age-62 rule — COLAs generally do not begin until age 62, with exceptions for disability, survivor and special-provision retirements.
Practical Takeaways
Do not budget on a forecast. The spread between 3.1% and 3.6% is roughly $10 a month on an average benefit. TSCL calculated that a 3.6% adjustment would move the average benefit from $1,937.53 to $2,007.28 — about $69.75. Wait for the October figure before locking a 2027 plan.
If you have a FERS pension, model the haircut explicitly. A one-point annual gap compounds. Over a 25-year retirement, that shortfall is the single largest structural difference between a FERS and a CSRS annuity, and it argues for holding a larger share of inflation-responsive assets outside the pension.
Know that the index is not built for you. COLA uses CPI-W, which weights the spending of working-age urban wage earners. The BLS also publishes CPI-E, an experimental index tracking households age 62 and older, which TSCL's analysis found runs higher than CPI-W roughly 69% of the time. For 2026, CPI-E would have produced 3.0% instead of 2.8%.
Watch the data quality caveat. BLS suspended price collection entirely in Lincoln, Provo and Buffalo during 2025 and cut roughly 15% of the sample across the other 72 collection areas. BLS simulations estimate the effect on 12-month national inflation at under one-hundredth of a percentage point, but the agency has not measured the impact on subnational indexes.
Sources: U.S. Office of Personnel Management – How is the Cost-of-Living Adjustment (COLA) determined?; MyFederalRetirement – 2027 CSRS/FERS COLA Watch; The Senior Citizens League – COLA Projection Falls to 3.6% (August 12, 2026); AARP – Social Security COLA Preview: Will 2027 Benefits Go Up?; U.S. Bureau of Labor Statistics – CPI Collection Reduction Notice
This article is for educational purposes only and is not financial, tax, or investment advice. Consult a qualified professional about your individual situation.