Millions of Americans are set to receive a bigger Social Security payment next year, but rising household costs could quickly absorb much of the increase. The Social Security Administration has announced a 3.6 percent cost-of-living adjustment, or COLA, for 2027, increasing the average retired worker's monthly benefit from $2,095 to $2,170. That is $75 more per month, a lot more than the 2.8 percent adjustment that retirees received last year.
But the reason is far from positive, as a higher COLA reflects the rise in inflation the country has witnessed since the war in Iran began on February 28. Consumer prices were 3.7 percent higher in September than a year earlier, according to the Bureau of Labor Statistics (BLS), driven mainly by higher energy costs pushed up by ongoing disruptions in the global oil market. The Strait of Hormuz, which used to see the passage of ships transporting one-fifth of the world's oil, remains closed as of Thursday, with no timeline for its reopening.
Fuel prices at the pump—including gasoline and diesel—jumped by 34.2 percent over 12 months, according to official data. But the problem has spilled beyond the energy sector: Core inflation, which takes out volatile items such as food and energy, was 2.6 percent last month. Older homeowners struggling with rising costs can choose to make some sacrifices, including making fewer car trips.
But there are also unavoidable expenses, such as housing—and these are already increasing faster than their forthcoming benefit adjustment. "Every year, Social Security's benefits are automatically adjusted to account for inflation. This is an essential feature of the system, which prevents benefits from eroding over time," Nancy Altman, the president of Social Security Works, said in a news release on October 14.
"Next year's COLA can't come soon enough for many Social Security beneficiaries. The Trump administration's war of choice with Iran and tariff chaos have driven gasoline prices up nearly 40 percent, and caused grocery costs to skyrocket," she continued. "The COLA adjustment will help.
But it doesn't fully account for the costs that Social Security beneficiaries face." Richard Fiesta, the executive director of the Alliance for Retired Americans, said in a similar statement on Wednesday: "Millions of Americans who rely on Social Security welcome any increase in their monthly benefits, but even this larger-than-normal cost-of-living increase is just not enough to keep up with the cost of food, gas, utilities, and prescription drugs. "The average retired worker will see about $74 more per month next year, but a good chunk of that will be wiped out by the higher Medicare Part B premium, which is projected to rise to $209.50 a month in January." Newsweek contacted the Alliance for Retired Americans, AARP and the Senior Citizens League for comment by email on Thursday. The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rather than an index specifically tracking retirees.
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