Average Social Security COLA adds $75 a month in 2027; Fidelity suggests a planning review

Benefits will rise by an average of $75 per month in 2027, the Social Security Administration confirmed. Fidelity Management & Research Company LLC suggested advisors reopen retirement income conversations with clients, PLANADVISER reported.

Fidelity's analysis recommended advisors discuss boosting savings, delaying Social Security benefits when appropriate and developing additional sources of retirement income. The viewpoints article was published the day after the confirmation, and at $75 a month the average adjustment is worth $900 a year.

Frank Maltais, a vice president and financial consultant at Fidelity Investments, told PLANADVISER that using a long-range inflation average can smooth out the ups and downs of inflation assumptions. He said the firm has clients consider how inflation affects their expenses. The COLA resets annually, while the inflation assumption in a retirement income plan runs for decades.

The Old-Age and Survivors Insurance Trust Fund is estimated to deplete its reserves in the third quarter of 2032, according to PLANADVISER. Lawmakers continue to debate measures to address the program's long-term funding challenges. Fidelity's analysis grouped the policy responses into three buckets: modifying benefits, raising revenue through taxes, and expanding the number of workers contributing to the system.

Katie Colon, a vice president and financial adviser at CAPTRUST, told PLANADVISER the announcement is an opening for plan sponsors to discuss broader financial and retirement planning topics. "It's a really good opportunity for plan sponsors to discuss broader financial and retirement planning topics, especially with [the current rate of] inflation," she said, adding that "it's an important conversation on how Social Security will fit into their overall retirement income strategy." For sponsors, the conversation can include whether participants are adequately saving for retirement.