CPI Data Is Out, and There’s Bad News and Good News on the Social Security COLA

Social Security’s COLA announcements are a big deal for a reason. For many seniors, Social Security is their only source of income. So a larger COLA versus a smaller one could spell the difference between being able to cover retirement expenses versus having to skimp on essentials.

To put it even more bluntly, a stingy Social Security COLA could mean that some seniors might have to skip meals, cut medication doses in half, and resort to other such extremes. So any time there’s an inkling of a small COLA, it can be devastating for retirees who rely heavily on those benefits.

Unfortunately, the latest Consumer Price Index (CPI) data has some discouraging news about next year’s COLA. But there may be some good news in the context of this year’s COLA.

A mixed bag for retirees

December’s CPI showed that inflation rose 2.7% on an annual basis. That’s good news for seniors who are hoping to make the most of this year’s Social Security COLA.

In 2026, Social Security benefits rose 2.8%. If inflation is being measured at 2.7%, it means this year’s COLA is outpacing inflation slightly — at least as of now.

But the news isn’t all rosy. Based on that same CPI reading, the nonpartisan Senior Citizens League is estimating that 2027’s Social Security COLA will only be 2.5%. That’s the same raise retirees got in 2025, and for many, it wasn’t enough.

Of course, it’s too soon to predict next year’s Social Security COLA, because those raises are based on third quarter inflation data. There’s a lot of time for that projection to change — for better or for worse.

Similarly, this year’s Social Security COLA might be ahead of inflation for now. But if costs rise in the coming months, Social Security recipients could easily lose out on buying power, even with their 2.8% raise.

It’s best to have other income to rely on

All of this goes to show how important it is for retirees to have income outside of Social Security. The program’s COLAs can’t be relied upon to provide financial relief, so the ability to cope with fluctuating costs hinges on having additional income streams.

If you’re still working, consider this a wakeup call to build some decent retirement savings. Of course, it may be too late for current retirees to do that. But current retirees can still try to find ways to generate additional income, like working part-time.

What’s in store the CPI for the rest of the year?

It’s hard to know. Economists seem to think the tariff situation could go either way.

Tariffs might drive prices upward, leading to higher levels of inflation and a larger Social Security COLA in 2027. Or, they could cause a pullback in consumer spending, leading to lower inflation and a smaller 2027 Social Security COLA.

It’s too soon to know. But if you’re depending on a large COLA for 2027, now’s the time to rethink your finances and come up with a plan of action in case next year’s raise disappoints.