Surging gasoline prices and the highest inflation reading in nearly two years are pushing
The estimate for next year’s Social Security cost-of-living adjustment has jumped sharply in just one month, driven by a surge in gasoline prices and an inflation reading that climbed to its highest level in nearly two years. For the roughly 75 million Americans who depend on Social Security and Supplemental Security Income benefits, the revised figure carries real financial weight — though higher adjustments are not necessarily the good news they might appear to be on the surface.
How the estimate changed so quickly
Independent Social Security and Medicare policy analyst Mary Johnson now projects the 2027 COLA could reach 3.2%, a significant revision upward from the 1.7% increase she had forecast as recently as March. The revision was prompted by March consumer price index data released Friday, which showed inflation accelerating to its steepest pace in nearly two years. Rising gasoline prices are the primary driver of that shift, feeding directly into the inflation calculations that underpin the annual adjustment.
The Senior Citizens League, a nonpartisan advocacy organization for older Americans, holds a more conservative estimate of 2.8% for 2027, unchanged from its March projection. The gap between the two forecasts reflects different analytical approaches and assumptions about how inflation will behave through the rest of the year, since the final COLA figure will not be determined until third-quarter data is fully calculated.
How the COLA is actually calculated
The Social Security COLA is not determined by any single month’s inflation data. It is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W, which tracks price changes across a defined basket of goods and services. The official adjustment is calculated by comparing CPI-W data from the third quarter of the current year — July, August and September — against the same period from the previous year. The percentage difference between those two figures becomes the following year’s COLA. Current early-year estimates like Johnson’s are projections based on available data, not final figures.
The CPI-W rose 3.3% over the past 12 months according to the most recent Bureau of Labor Statistics data, providing the baseline from which analysts are drawing their current estimates.
Why a higher COLA is not simple good news
The instinct to welcome a larger COLA increase is understandable, but the reality for beneficiaries is more complicated. A higher adjustment reflects higher prices — meaning retirees and other recipients are absorbing the shock of more expensive goods and services before any adjustment arrives. The COLA is a response to inflation, not a buffer against it, and many beneficiaries have long felt the annual adjustment underestimates how much inflation actually affects their daily spending.
That gap between official calculations and lived experience is well documented. A September survey by AARP found that 77% of Americans age 50 and older do not believe a 3% COLA is sufficient to keep up with rising prices. Nearly three-quarters of respondents said a 5% or higher increase would be needed to genuinely cover everyday expenses, while 26% felt an 8% increase would be required to stay current with actual cost increases they are experiencing.
Where recent adjustments stand
In 2026, approximately 75 million Social Security and Supplemental Security Income beneficiaries received a 2.8% COLA, which translated to an average monthly retirement benefit increase of $56 starting in January, according to the Social Security Administration. The decade average for the COLA sits at 3.1%, though that figure was pulled upward significantly by the post-pandemic inflation spike that produced record-high adjustments of 5.9% in 2022 and 8.7% in 2023. Adjustments have been more modest in the years since, and the current trajectory suggests 2027 will land somewhere in the middle of that recent range — though much depends on how energy prices and broader inflation develop through the summer.
Source: CNBC, reporting by Lorie Konish