The Social Security cost-of-living adjustment for 2027 is estimated to be as high as 4.2% as inflation continues to rise, largely driven by higher energy costs stemming from the Iran war.
Mary Johnson, an independent Social Security and Medicare policy analyst, projected the increase amid surging prices for gasoline, energy, and groceries. The Iran war significantly affected the estimate, as Johnson had previously set the 2027 COLA estimate at 3.2%.
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The new forecast is based on April’s consumer price index data released by the Bureau of Labor Statistics on Tuesday.
The broad consumer price index rose 3.8% over the past 12 months, according to the data. This marks the fastest increase since May 2023. The index has been steadily increasing since the United States and Israel attacked Iran in late February.
The war, which has effectively closed the Strait of Hormuz to commercial shipping, caused the energy index to rise 3.8% in April.
Meanwhile, the Consumer Price Index for Urban Wage Earners and Clerical Workers increased 3.9% over the past year. The estimate is used to calculate the Social Security COLA, an annual increase for benefits designed to keep up with inflation.
INFLATION ROSE TO 3.8% IN APRIL, HIGHEST SINCE 2023, AS IRAN WAR RAISED ENERGY PRICES
Social Security benefits increased 2.8% this year, with the larger payouts beginning last January.
While Johnson’s 4.2% estimate is concerning, the COLA forecasts for next year are subject to change in the coming months. The Social Security Administration will calculate the figure based on inflation data until the agency announces a COLA change, typically in October.
