Social Security's 2027 COLA Could Be Much Bigger Than Current Forecasts Imply

Key Points

The most recent forecasts put Social Security's 2027 cost-of-living adjustment (COLA) between 2.8% and 3.1%.

Inflation is accelerating and could remain elevated through the end of the year due to the Iran conflict.

In 2027, a 3.8% COLA would mean an extra $79 in monthly benefits for the average retired worker.

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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) and Congressional Budget Office put the 2027 COLA at 2.8% and 3.1%, respectively. But those numbers are starting to look woefully low.

Inflation increased dramatically in March due to soaring energy prices tied to the Iran conflict, and damaged oil infrastructure would likely keep prices elevated even if the two sides reach a resolution tomorrow. If inflation continues to worsen through the summer, Social Security benefits will get a much larger COLA than current projections imply.

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Why Social Security's 2027 COLA could be much higher than forecasts imply

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 based on a subset of the Consumer Price Index called the CPI-W.

The math is simple: 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 instance, the CPI-W increased 2.8% in the third quarter of 2025, so Social Security benefits received a 2.8% COLA in 2026.

CPI-W inflation measured 2.2% in January and February, but accelerated to 3.3% in March as energy prices spiked due to the Iran conflict. And because oil infrastructure has been damaged, some analysts think oil prices will remain elevated through the end of the year. That means inflation could accelerate further in the coming months as high gas prices drive up manufacturing and transportation costs. In turn, the 2027 COLA could be much higher than current forecasts imply.

Here's how much Social Security benefits could increase in 2027

A forecasting tool from the Federal Reserve Bank of Cleveland shows CPI inflation trending toward 6% in the second quarter. CPI inflation is not exactly the same as CPI-W inflation, but overlapping reference populations mean the values are generally very close, if not identical.

It's too early to estimate CPI-W inflation in the third quarter, so the chart below considers three possibilities: 2.8%, 3.3%, and 3.8%. For each scenario, the chart also shows what the average Social Security benefit would be in 2027 based on current payouts.

| Benefit Type | Average Benefit Today | Average Benefit (After 2.8% COLA) | Average Benefit (After 3.3% COLA) | Average Benefit (After 3.8% COLA) | |---|---|---|---|---| | Retired Worker | $2,081 | $2,139 | $2,150 | $2,160 | | Spouse | $986 | $1,014 | $1,019 | $1,023 | | Survivor | $1,626 | $1,672 | $1,689 | $1,688 | | Disabled Worker | $1,635 | $1,681 | $1,689 | $1,697 |

As shown above, a 2.8% COLA in 2027 (which matches the most recent forecast from The Senior Citizens League) would mean an extra $58 in monthly benefits for the average retired worker. But a 3.8% COLA in 2027 would mean an extra $79 in monthly benefits.

Why a large COLA may be bad news disguised as good news for Social Security beneficiaries

The prospect of a sizable pay increase probably seems appealing, but high COLAs tend to be bad news in disguise. They are a symptom of high inflation, and Social Security benefits have historically failed to keep up with inflation over long periods, according to The Senior Citizens League.

In fact, TSCL research suggests the buying power of Social Security fell 20% between 2010 and 2024 because COLAs were often insufficient. So, it stands to reason that lower inflation (and smaller COLAs) would actually be better for Social Security beneficiaries because benefit payments would likely retain more buying power.

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