Is your retirement plan counting on a Social Security COLA in the future?

Projections for the 2027 COLA are around 3.5%, but that could be the last such increase.

As part the effort to fix SS solvency, the idea of a flat fixed dollar COLA has surfaced again. In short that would mean most retirees would receive less than under the current calculation.

For example, the COLA adjustment would be based on a certain level of benefits, say the 20th percentile. That is currently about $1,200 to $1,300 per month. So, 3.5% of $1,250 is $43.75 or a COLA of $44.00. That would be the dollar amount of everyone’s COLA. Therefore, beneficiaries at or below the 20% percentile will receive an equal or greater amount than under the current system and 80% will receive a lower COLA.

The Committee for a Responsible Federal Budget estimates that at the 20th percentile a Flat-Rate COLA enacted in 2027 would close half of Social Security’s 75-year shortfall; at the 30th percentile it would close two-fifths of Social Security’s long-term gap.

Needless to say the AARP strongly opposes this approach, saying it would especially harm older retirees.

Another option being mentioned is a straight COLA cap

In any case, lower future COLAs in some form may be on the horizon. Time to plan?

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