Summary
The Federal Reserve's recent decision to lower interest rates could lead to a smaller increase in Social Security payments in 2027. This is because the rate cut may result in a lower cost-of-living adjustment (COLA), which affects how much Social Security recipients receive each year. More than 70 million Americans rely on these payments.
Key Facts
- The Federal Reserve cut interest rates by 0.25 percent in December.
- Future rate cuts by the Fed may be paused for some time.
- Social Security payments for over 70 million Americans depend on the COLA, which is adjusted yearly based on inflation.
- The Fed's benchmark interest rate will be between 3.5 to 3.75 percent moving into 2026.
- The Consumer Price Index (CPI) helps determine the COLA by measuring inflation.
- Estimates suggest the COLA for 2027 could be as low as 2.1 percent.
- A lower COLA means reduced Social Security payments, reflecting lower inflation rates.
- Lower COLA could also result in lower expenses for consumers over the long term.
