Social Security's 2027 COLA Could Be Much Bigger Than the Latest Forecast Implies

Social Security benefits receive an annual cost-of-living adjustment (COLA) to help retired workers keep up with rising prices. The latest forecasts from The Senior Citizens League (TSCL) put the 2027 COLA at 3.8%, a full percentage point above the 2026 COLA.

However, inflation has accelerated sharply in recent months due to soaring energy prices tied to the Iran conflict, which has caused the largest oil supply disruption in history, according to the International Energy Agency. And the downstream impacts of the conflict could keep inflation elevated through the summer, leading to a much larger COLA than TSCL's current forecast implies.

Here's what Social Security beneficiaries should know.

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Social Security's COLAs are based on changes in CPI-W inflation

The Social Security Administration (SSA) calculates COLAs based on how inflation changes during the third quarter, meaning the three-month period between July and September. In this scenario, inflation is measured using a subset of the Consumer Price Index (CPI) called the CPI-W.

The math is easy: The CPI-W from the third quarter of the current year is divided by the CPI-W from the third quarter of the previous year, and the percent increase becomes the COLA in the next year. For example, the CPI-W increased 2.8% in the third quarter of 2025, so Social Security benefits received a 2.8% COLA in 2026.

Social Security's 2027 COLA could approach 5% if inflation continues to increase

CPI-W inflation dropped to 2.2% in January, the lowest level in nearly a year. But President Donald Trump authorized military strikes in Iran in late February, and conflict in the Middle East has since closed the Strait of Hormuz, a key oil shipping route in the Persian Gulf. As a result, CPI-W inflation accelerated to 3.3% in March, 3.9% in April, and 4.4% in May.

Importantly, the latest CPI-W reading represents the hottest inflation since early 2023, and the situation is likely to get worse through the summer because supply chain bottlenecks and damaged infrastructure will take time to fix. A forecasting tool from the Federal Reserve Bank of Cleveland shows the CPI (which is similar to the CPI-W) increasing 6.7% during the second quarter.

Here's the big picture: CPI-W inflation measured 4.4% in May. That means Social Security benefits would get a 4.4% COLA if inflation remained unchanged through the third quarter. However, downstream impacts of the Iran conflict could drive inflation higher through the summer, such that the 2027 COLA could approach 5%.

Indeed, independent Social Security and Medicare policy analyst Mary Johnson (who previously worked with TSCL) recently raised her 2027 COLA forecast to 4.7%. But she cautioned, "There's a considerable likelihood that it's going to climb even higher than 4.7% as data continues to come in, especially on the gasoline prices."

The average Social Security benefit for retired workers could increase by $1,176 in 2027

The Bureau of Labor Statistics will publish its September inflation report on Oct. 14, and the Social Security Administration will probably announce the official 2027 COLA that same day. The chart below shows how the average Social Security benefit paid to different types of recipients would change if the 2027 COLA were 3.8% or 4.7%.

Data source: Social Security Administration. The chart above shows average monthly Social Security benefits with cost-of-living adjustments (COLAs) of different sizes in 2027. All numbers have been rounded to the nearest dollar.

As shown above, a 3.8% COLA in 2027 would raise the average retired worker benefit to $2,160 per month; that represents an extra $79 in monthly Social Security income ($948 for the full year). Alternatively, a 4.7% COLA in 2027 would increase the average retired worker benefit to $2,179 per month; that represents an extra $98 in monthly Social Security income ($1,176 for the full year).

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