Inflation dropped in June to 3.5%, a decline from 4.2% in May. That’s according to the latest figures from the U.S. Bureau of Labor Statistics. Skyrocketing energy prices pushed the rate of inflation to its highest level in 2026. But the promise of a ceasefire with Iran reduced the cost of oil, and with it, inflation. The takeaway for seniors is that they are still paying higher prices than they did a year ago, and that could translate into a bigger bump in their Social Security benefits in 2027.
“With each passing week, sometimes daily, we are hearing hints of a higher COLA coming in 2027,” says Martha Shedden, co-founder and president of the National Association of Registered Social Security Analysts. “It is not surprising, given the increase in energy costs and everyday expenses we’re experiencing.”
The COLA is an annual cost-of-living adjustment to Social Security benefits and is based on the consumer price index. The CPI is a common measure of inflation and calculated monthly by the BLS.
The , which regularly releases estimates, predicts the 2027 COLA will be 3.8% based on the most recent economic data. The organization uses the consumer price index, Federal Reserve interest rate and unemployment rate when making its projections.
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Inflation Predictions for 2026
The Social Security COLA is based on the consumer price index for urban wage earners and clerical workers. Known as the CPI-W, this index is based on the price of a basket of goods and services commonly purchased by consumers. The COLA is based on the average annual CPI-W from the third quarter of the previous year.
The CPI-W can vary from the CPI for all goods. However, in June 2026 the CPI for all goods and the CPI-W were the same at 3.5%. In May, the numbers were 4.2% and 4.4%, respectively.
In 2025, the average annual CPI-W for the third quarter was 2.8%. That translated into a 2.8% increase in Social Security benefits beginning in January 2026. At the start of the year, many experts expected inflation to decline in 2026, meaning next year’s COLA would be lower. Now, some are revising their estimates upwards to account for the impact of the war with Iran. Most notably, energy prices in June 2026 were up 15.7% compared to 12 months earlier.
Here are what some economists have predicted for inflation this year and when their predictions were made:
— 2.7% to 4.1%, according to the (June 2026)
— 2.5% to 6.0%, according to a survey of professional forecasters by the (May 2026)
— 3.6%, according to (April 2026)
Some of these estimates are based on the price index for personal consumer expenditures, which can vary slightly from the CPI.
“The BLS indicates that key drivers are due to geopolitical conflict with energy gains…and the price of gasoline up,” Shedden says. “The repercussions of higher transportation costs, due to these increases, have a domino effect on the costs of goods and services in many sectors.”
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Factors That Could Affect the 2027 Social Security COLA
The actual Social Security COLA for 2027 could be influenced by factors such as the conflict in Iran, tariffs, tax cuts and the labor market.
For instance, the was arguably the most impactful legislation passed in 2025. “We think it’s going to be inflationary long-term because of the tax cuts,” says Corey Briggs, director of wealth planning at the Plaza Advisory Group with Steward Partners in St. Louis.
The bill included an additional senior deduction, which Briggs describes as “huge tax savings,” as well as expanded the state and local tax deduction and extended the qualified business income deduction. These, along with declining interest rates, could spur spending, which in turn drives inflation.
Meanwhile, the role of could also have an effect, Briggs says. If AI is able to replace workers, that could mean higher unemployment and less money flowing into the economy, which may slow inflation.
“There are obviously so many unknowns,” Shedden says. She thinks tariffs, trade and the labor market could all play a role in this year’s inflation rate and the 2027 Social Security COLA.
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Changing the CPI Could Change the COLA
Changing the CPI used to calculate the Social Security COLA could also affect how much more retirees receive in benefits in 2027.
There are multiple versions of the CPI, and some argue that the CPI-W doesn’t adequately reflect the spending habits of those receiving Social Security.
“Older Americans aren’t buying many products,” Shedden says. “They are spending a disproportionate amount of their money on health care and prescriptions.”
However, medical care services are only a small part of the CPI-W. Instead, some argue that the CPI-E, which was designed to track the expenses of the elderly, would be a more appropriate measure for the Social Security COLA.
A change to the CPI-E could increase the annual Social Security COLA by 0.2 percentage points on average, according to Briggs. For instance, if the CPI-E were used, the 2026 COLA might have been 3% rather than 2.8%.
The Social Security Expansion Act was introduced in 2025 to make that change, among other amendments to the Social Security program. More recently, the Social Security 2100 Act was introduced to adjust the minimum Social Security benefit to 125% of the federal poverty limit. That bill is the “gold standard of Social Security reform,” according to Shannon Benton, executive director of The Senior Citizens League.
“The reality is that poverty is increasing rapidly among American seniors, who make up the fastest-growing portion of the homeless population,” Benton said in a press release. “Adjusting the minimum benefit to above the federal poverty line would almost certainly slow this trend, although more holistic efforts may be required to stop it entirely.”
Not everyone thinks bills that would increase benefits will see action by Congress, though. “I don’t think that has traction because we’re already losing money,” says Steve Parrish, professor of practice and a scholar in residence at the Cary M. Maguire Center for Ethics in Financial Services at The American College of Financial Services.
With the in less than a decade, Parrish doesn’t think Congress will change the CPI in a way that will increase the annual COLA. Moving to a chained CPI is more likely, he says, noting that it was the version of the CPI used for calculations in the Tax Cuts and Jobs Act of 2017.
The chained CPI accounts for substitutions that consumers might make — such as buying chicken when beef is expensive, Briggs explains — and is typically lower than the CPI-W. Using a chained CPI would likely result in a slightly lower COLA, but seniors may not have to worry about that change next year. There has been talk about moving to a chained CPI for years, and no action has been taken yet.
Medicare Increases Could Offset COLA
Regardless of the exact amount of the 2027 Social Security COLA, there is a good chance that much of it will go to pay for increases in Medicare costs.
“You’re really getting hit two ways with medical,” Parrish says. The CPI-W doesn’t accurately reflect senior health care costs, and seniors also have to contend with Medicare premiums that are increasing at a pace that far exceeds the COLA.
For 2026, monthly premiums went up 9.7% at a time when the COLA only increased Social Security benefits by 2.8%. Whatever the Social Security COLA in 2027 ends up being, seniors should be prepared for a large portion of it to be absorbed by rising health care costs.
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Update 07/14/26: This story was published at an earlier date and has been updated with new information.
