Joe Raddle | getty images
According to Mary Johnson, an independent Social Security and Medicare policy analyst, the cost of living adjustment, or COLA, could be 3.2% in 2027 due to rapidly rising gasoline prices. That’s higher than the 1.7% COLA increase Johnson estimated in March.
Johnson’s estimate is based on March consumer price index data released on Friday that showed inflation reached the highest level in almost two years.
Social Security and Supplemental Security Income beneficiaries receive an adjustment to their benefits each year through COLA, which is intended to help ensure that inflation does not weaken the purchasing power of their benefits.
Separately, the Senior Citizens League, a non-partisan seniors group, estimates the COLA could be 2.8% in 2027 based on the latest inflation data, unchanged from its forecast in March.
In 2026, approximately 75 million Social Security and Supplemental Security Income beneficiaries received a 2.8% cost-of-living adjustment. Starting in January, retirement benefits increased by an average of $56 per month, according to the Social Security Administration.
According to the Social Security Administration, the COLA has averaged 3.1% over the past decade. Yet as inflation surged following the COVID-19 pandemic, beneficiaries saw record high growth of 5.9% in 2022 and 8.7% in 2023. This was followed by more modest increases in recent years.
How does COLA reflect inflation?
According to Johnson, the forecast higher COLA isn’t necessarily good news for retirees, who have to absorb the shock of higher prices.
“They have always felt that the COLA underestimates their actual experience of inflation,” Johnson said.
A September AARP survey found that 77% of Americans ages 50 and older don’t think a 3% COLA is enough to keep pace with rising prices.
The AARP survey found that about 72% of respondents said an increase of 5% or more would be enough to cover everyday expenses, 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 to CPI-W data for the third quarter of the previous year. The year-over-year percentage increase determines the COLA.
The CPI-W increased 3.3% over the past 12 months, according to data released Friday by the Bureau of Labor Statistics.
<a href=