Social Security’s 2027 COLA May Be Higher Than Expected

If you’re someone who collects Social Security, there’s probably one question you find yourself asking throughout the year: What will my next raise look like?

The reality is that many people on Social Security don’t have much income aside from those monthly benefits. So the program’s annual cost-of-living adjustments, or COLAs, are very important.

This year, Social Security benefits got a 2.8% COLA in January. Unfortunately, a good chunk of that COLA is being eaten up by Medicare Part B premiums, which rose almost $18 a month from 2025.

Initial estimates say that next year’s Social Security COLA will be similar to this year’s. The nonpartisan Senior Citizens League is actually projecting a 2.8% increase — the same COLA that came through this past January.

But there’s a reason 2027’s Social Security COLA could end up being much higher. Whether it’s a good reason is debatable.

Will higher gas and energy prices result in a gigantic 2027 COLA?

If you’ve been following the news or paying attention at the pump, you may be aware that gas and energy prices have soared since the start of the Iran conflict. But those higher aren’t self-limiting.

When it costs more to transport goods, their price tag tends to go up. So if these super-high gas prices continue, it could easily lead to more expensive groceries, apparel, and other products.

Similarly, higher gas and energy prices could drive the cost of common services up. So all told, U.S. consumers could face higher costs than expected this year.

Now in one way, higher costs are a good thing for Social Security COLAs — namely, because they can push COLAs up. So if recent trends continue, seniors on Social Security may be in line for a 2027 COLA that’s much larger than 2.8%.

However, it’s important to realize that a larger COLA will come at the price of higher costs across the board. So it’s hard to call that a winning situation.

Social Security’s 2027 COLA might disappoint either way

Whether next year’s COLA comes in closer to the 2.8% mark or much higher, it’s important to realize that it may not help you keep up with your expenses. That’s due to a big flaw in the COLA formula.

COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. When there’s a rise in the index from one year to the next year, Social Security benefits get a boost.

But the CPI-W doesn’t accurately reflect the expenses seniors on Social Security face. And because Social Security recipients tend to spend a lot of their income on healthcare costs, which commonly outpace inflation broadly, they tend to lose out even when COLAs are more generous.

As such, if you’re banking on a large COLA to improve your finances in 2027, don’t. Instead, try to find ways to boost your income.

A good bet is to find part-time work, which could do two great things for your finances. First, it could boost your monthly pay, giving you more breathing room. Secondly, if you can bank and invest some of your earnings, you can grow yourself a little nest egg if you don’t have savings already.

It’s too soon to know how long elevated gas and energy prices will persist, and how they’ll impact next year’s Social Security COLA. But if you’re someone who’s counting on a big raise in 2027, you may want to take matters into your own hands instead.