Social Security 2027 cost-of-living adjustment estimate rises with gas prices

The cost-of-living adjustment, or COLA, could be 3.2% in 2027 due to sharply rising gasoline prices, estimates Mary Johnson, an independent Social Security and Medicare policy analyst, based on March consumer price index data released on Friday that shows inflation climbed to the highest level in nearly two years.

That is up from a 1.7% COLA increase Johnson had forecast in March.

Social Security and Supplemental Security Income beneficiaries receive an adjustment to their benefits each year through the COLA, which is aimed at helping to ensure that inflation does not weaken the purchasing power of their benefits.

In 2026, about 75 million Social Security and Supplemental Security Income beneficiaries received a 2.8% cost-of-living adjustment. That pushed retirement benefits up by $56 per month, on average, starting in January, according to to the Social Security Administration.

In the past decade, the COLA has averaged 3.1%, according to the Social Security Administration. Yet as inflation spiked following the Covid-19 pandemic, beneficiaries saw record high increases of 5.9% in 2022 and 8.7% in 2023. That was followed by more modest increases in recent years.

A September AARP survey found that 77% of Americans aged 50 and over do not think a 3% COLA is enough to keep up with rising prices.

Some 72% of respondents said an increase of 5% or higher would be sufficient to cover everyday expenses, the AARP survey found, while 26% said an 8% increase would be necessary to keep up with rising costs.

The Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks price changes for certain goods and services.

The annual COLA adjustment is calculated by comparing CPI-W data for the third quarter of the current year with CPI-W data for the third quarter of the previous year. The percentage increase from year to year determines the COLA.

The CPI-W increased 3.3% over the past 12 months, according to data released by the Bureau of Labor Statistics on Friday.