How Inflation Is Quietly Eating Into Your Social Security Check This Year
Key Points
Inflation in March was 3.3%, higher than the Social Security 2.8% COLA for this year.
If inflation continues at this rate, the 2027 Social Security COLA will be one of the highest in a few years.
Social Security uses the CPI-W to determine the annual COLA amount.
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Inflation is a normal part of the economy (and generally much better than deflation), but that doesn't make it any easier to stomach. This is particularly true for people who rely on fixed incomes, like millions of retirees receiving Social Security.
To help offset it, Social Security implements an annual cost-of-living adjustment (COLA). This year, Social Security recipients received a 2.8% boost to their benefits, but with energy prices skyrocketing amid the ongoing conflict in the Middle East, much of that boost has been canceled out.
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Just how bad is inflation?
The standard inflation measure used in the U.S. is the Consumer Price Index for All Urban Customers (CPI-U). It tracks the prices of goods and services such as food, transportation, medical care, and energy.
The CPI-U in March was up 3.3%, with most of the increase driven by higher energy costs. Energy inflation was up 10.9%, but gasoline was much worse, up 21.2%.
Retirees may not feel the increase in costs for things like apparel or education as much, but higher gas prices are having a real effect on people's wallets.
If your benefit was $2,000 in 2025 and you now receive $2,056 after the 2.8% COLA, the $56 extra each month doesn't go as far if it's costing you an extra $20 every time you fill up your tank.
Inflation could lead to a larger COLA
The only silver lining is that if current inflation continues through the third quarter (July, August, and September), the 2027 COLA could be one of the highest in a few years.
Social Security sets the annual COLA based on changes in the CPI-W rather than the CPI-U, but many of the items it measures overlap, including energy prices. And since the CPI-W gives more weight to gasoline, it's likely to be higher than the CPI-U.
Social Security looks at the average CPI-W in the third quarter of each year, compares it to the previous year's average, and sets the COLA to the percentage increase (if there's no increase, there's no COLA for the upcoming year).
The Senior Citizens League (TSCL) -- a senior advocacy group -- has its COLA estimate at 4%. TSCL's estimate is only an estimate, but if it turns out to be correct, it'd be the highest COLA since 2023 and the third-highest in the past 17 years.
Ideally, Social Security recipients wouldn't need a big COLA because inflation would be at healthy levels. And a future COLA doesn't help with the sting that retirees are experiencing right now. However, it's better to have something than to continue losing purchasing power rapidly.
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