The Social Security cost-of-living adjustment for 2027 will be a 3.2% increase in benefits due to sharply rising gas prices based on the March data released Friday, according to Mary Johnson, an independent Social Security and Medicare policy analyst.
In March, the Consumer Price Index for All Urban Consumers rose 0.9%, seasonally adjusted, and rose 3.3% over the last 12 months, not seasonally adjusted.
"This represents the biggest single month jump we've seen in inflation since 2022 (which was also the March data for the year)," Johnson said Friday in a statement.
Two months ago, she estimated that the COLA for 2027 would be 1.2% based on January 2026 data. The Senior Citizens League predicted a 2.8% increase, and the projection has held steady through the group's most recent monthly release on Friday.
The big jump in consumer prices in March appears "to be setting us on track for a far higher COLA than any of the experts were forecasting just two months ago," Johnson said in an email. "This is not good news."
Social Security "is one of the few sources of retirement income to provide a cost of living adjustment in an effort to protect the buying power of benefits," Johnson said.
The COLA for 2026 was 2.8%.
The Consumer Price Index for Urban Wage Earners and Clerical Workers, the index used to calculate the COLA, was 3.3% in March.
"If an individual received an average benefit of about $2,071 last year he or she would have received a monthly increase of about $56 prior to reductions for Part B premiums and taxes," Johnson said. "But to keep up with inflation in March an increase of $66.50 would have been needed to offset a loss in buying power due to inflation — even with a COLA. Retirees in general commonly feel that the COLA only provides a very modest increase that rarely keeps up with actual inflation."
As geopolitical tensions with Iran continue "there will likely be continued upward price increases for many goods and services including groceries, and shelter as rising gasoline prices and supply chain disruptions get passed along to consumers," Johnson relayed.
President Donald Trump said Sunday that the price of oil and gasoline may remain high through November's midterm elections, Reuters reported.
With seven more months of data to come, Johnson says her estimate is likely to change.
"The COLA is determined by inflation in the third quarter of the year — July, August, and September. Social Security adds the inflation for each month together, determines the average and compares that to the average from the 4th quarter a year ago," Johnson added. "The percentage of change in the CPI-W is used to determine the COLA adjustment payable with the check received in January of the following year."
Shannon Benton, executive director of the Senior Citizens League, said in a separate email that the group "won't be issuing another projection until next month. Gas prices still haven't hit our model's projection. It sees this month as an aberration, not a trend yet."
Added Benton: "We expect if gas prices remain high, it will, in fact, bump up our projection (which already expected inflation to rise). If fuel prices hit the economy in other ways, such as employment or interest rates, we should be set to capture that, as well."
Credit: David Palmer/ALM
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