U.S. Social Security inflation adjustment estimate rises for 2027

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Social Security 2027 inflation adjustment

Highlights

Mary Johnson raises her 2027 Social Security COLA estimate to 4.7%, up from 4.2% last month, driven by May's higher inflation data.
The Senior Citizens League lowers its 2027 COLA forecast to 3.8%, compared to its May estimate of 3.9%, without disclosing specific reasons.
CPI-W jumps 4.4% year-over-year in May, led by fuel oil up 64.1%, gasoline up 40.7%, and airfare up 25%, pressuring retiree budgets.

Inflation data lifts 2027 COLA outlook

As reported by CNBC, consumer prices rise in May, pushing the annual inflation rate to its highest level in three years and leading to a higher estimate for Social Security's 2027 cost-of-living adjustment.

Mary Johnson, an independent Social Security and Medicare policy analyst, estimates the 2027 COLA at 4.7%, up from her previous 4.2% forecast last month. She says there is a considerable likelihood the estimate climbs above 4.7% as more data comes in, especially on gasoline prices.

Social Security's COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The Social Security Administration typically announces the following year's adjustment in October, based on third-quarter data.

Meanwhile, the Senior Citizens League now forecasts a 3.8% COLA for 2027, down from its 3.9% estimate in May. The group does not give a reason for the revision in the text provided.

Higher energy and travel costs pressure retirees

Broad CPI inflation rises 4.2% over the past 12 months as of May, while the CPI-W increases 4.4%, according to the Bureau of Labor Statistics. The sharpest CPI-W gains come from fuel oil, up 64.1%, gasoline, up 40.7%, and airfare, up 25%.

For 2026, about 75 million Social Security and Supplemental Security Income beneficiaries receive a 2.8% increase in monthly benefits. Johnson says that adds about $56 to an average $2,000 monthly benefit, but beneficiaries would need $94 more per month to keep pace with inflation.

The annual COLA averages about 3.1% over the past decade, according to the Social Security Administration. After inflation surged following the Covid-19 pandemic and drove COLAs of 5.9% in 2022 and 8.7% in 2023, price growth eases in later years, but consumer costs remain elevated for older Americans.

Our earlier report on the University of Michigan Consumer Sentiment Index showed confidence edging up in early June as lower gasoline prices offered some relief from still-elevated living costs. The survey also found that short- and long-term inflation expectations eased slightly, though consumers remained broadly concerned about persistent price pressures and their impact on household finances.

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