The Social Security COLA Trap: Why Your Buying Power Might Still Shrink
Modest COLA increases cannot always offset high inflation.
Overview
While it's true that something is better than nothing, cost-of-living adjustments (COLAs) are almost always a mixed bag. For one thing, the 2027 COLA will be based on inflation data for the third quarter of 2026 (July, August, and September). By the time January rolls around and the latest COLA kicks in, that inflation rate may already be outdated.
For example, if average inflation in the third quarter is 3.5% but jumps to over 4% in December or January, COLAs have already missed the mark. By design, COLAs are intended to help Social Security recipients keep pace with inflation. That's difficult to do when they lag.
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Originally published at www.fool.com.
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