Retirees could see a 3.4% increase in their monthly Social Security paychecks next year after the government said inflation cooled a bit in July, as expected, new calculations show.

That 2027 estimated cost-of-living adjustment, or COLA, is lower than last month’s 3.7% forecast but above the historical COLA average of 2.6%, said Mary Johnson, independent Social Security and Medicare analyst. The final COLA is usually announced in October, but Johnson calculates a rolling estimate using the latest monthly inflation data.

The consumer price index (CPI), a broad measure of goods and services costs, rose 3.4% in July from a year earlier, just lower than June’s 3.5%. The so-called core rate, which strips out volatile food and energy prices, rose 2.5%, down from 2.6% in June. Both remain above the Federal Reserve’s 2% target.

COLA is based on the “consumer price index for urban wage earners and clerical workers,” or CPI-W. That figure rose 3.4%, down from June’s 3.5% but still above the 2.8% COLA Social Security recipients began receiving in January.

“It’s doubtful that anyone is celebrating because 3.4% is still higher than the average, which is around 2.6%,” Johnson said. “We are in a brave new world of breathtakingly high prices and costs.”

Is a higher COLA good?

A 3.4% COLA in 2027 would be higher than the 2.8% increase Social Security beneficiaries received this year and above the Social Security Trustees’ projection of 2.7%. That may be good for retirees who struggle to keep up with inflation, especially for needs like health care, transportation and housing, where they spend most of their money.

Even so, the higher COLA likely won’t offset all the higher prices seniors face, Johnson said. For example, Medicare Part D, which covers prescription drugs, could also be a key expense for seniors next year, Johnson said. Last month, the Centers for Medicare & Medicaid Services said it’s ending the Part D Premium Stabilization Program on Jan. 1, 2027.

“Without the Part D pilot program’s increased subsidies to bring down premiums, this is likely to mean higher costs will be passed on to Medicare beneficiaries,” Johnson said. “It will be more important than ever to watch for changes and to compare options during Medicare Open Enrollment October 15 – December 7.”

High COLAs can “also impose significant costs on a Social Security retirement fund that is just six years from insolvency,” said analysts at the Committee for a Responsible Budget, which forecasts 2027 COLA at an even lower 3.2%.

The Social Security trust fund that supplements incoming payroll taxes to pay monthly Social Security benefits is expected to run dry by the end of 2032, according to the program’s trustees.

“Without action, beneficiaries will face an abrupt 22% benefit cut when the retirement fund is exhausted and the program is forced to restrict costs to incoming revenues,” CRFB said. “If a similar cut were imposed on retirees today, retirees would lose $500 per retiree per month, more than the average retired household spends on groceries each month.”

How can Social Security avoid cuts in six years?

CRFB has looked at COLA caps to help keep the Social Security trust fund solvent. A flat-rate cap would provide beneficiaries the same dollar COLA regardless of their benefit, it said. Another would limit COLAs paid to the highest-income beneficiaries to the COLA received by beneficiaries with lower – but still high – incomes.

In the end, no matter how many ideas are floated though, it is up to the voters to elect the right Congress to push a solution through, some say.

“Regretfully, it takes firm action to solve problems, and we’ve had people in elected positions who just kicked the can down the road, leaving the problem for future members,” said Luke Douglas, 77, a Social Security recipient from Smithfield, Kentucky. “Gutless cowards. I’m a Marine so I can say that. But the real truth is it is voters who are to blame. They are uninformed on what their Congressional members are doing or not doing yet they keep voting the same bozos back in. This leads to old, elderly people, many older than me, who should have been voted out decades ago.”

With Social Security insolvency so close, this November’s midterm elections will be very important, analysts said. The Congressional members elected in November will either be part of the class that fixes Social Security or lets it run dry in 2032, they said.

How is COLA calculated?

The Social Security Administration bases its COLA each year on average annual increases in the consumer price index for urban wage earners and clerical workers (CPI-W) from July through September. That means July inflation numbers are especially important to pay attention to.

The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it sometimes differs slightly. Last month, the overall consumer price index rose 3.4% and the index for urban wage earners matched that headline inflation number.

What was 2026’s COLA?

Older adults received a 2.8% bump in their Social Security checks at the beginning of the year to help recipients keep pace with inflation. That increased the average retiree benefit by $56 per month.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.