Social Security COLA for 2027 set for another bump with a major caveat

More money, more problems.Though the upcoming October 14 announcement of the US Bureau of Labor Statistics’ September inflation report — which reveals the last data point that will set Social Security’s latest cost of living adjustment (COLA) — will likely translate into a “raise” of sorts for the program’s 71 million beneficiaries next year, the potential benefit cuts that could eventually accompany this bump may be brutal.The 2027 COLA adjustment, which will be announced at 8:30 a.m.ET this Wednesday, is projected by The Senior Citizens’ League (an advocacy group) to increase by 3.5%, per The Independent. Though the bump sounds like a big win at first glance (indeed, the projected increase would be one of the largest of the past 35 years, according to The Motley Fool), the benefit cuts that may indirectly result — like potentially smaller SNAP food assistance allotments, higher Medicaid Part B premiums and less overall purchasing power for Social Security beneficiaries — could significantly hamper the announcement’s surface-level benefits in the not-so-distant future.These potential negative effects are mainly tied to projected issues with the Old-Age and Survivors Insurance trust fund (OASI), which is one of the two main financial accounts that support Social Security, and its dwindling asset reserves.As of now, the fund, which was established in 1939 and pays benefits to eligible retired workers and eligible family members of workers who’ve died, has an unfunded obligation of a whopping $29.3 trillion.

Though these funds are currently forecast to be exhausted by the fourth quarter of 2032, the high projected COLA bump could mean that the reserve will drain even faster, leading to substantially smaller Social Security checks if Congress does not intervene.If the law remains unchanged, continuing income would cover around 78% of potential benefits, according to the 2026 OASDI Trustees Report.Social Security beneficiaries should not panic...