In light of the escalating inflation and the ongoing Iran war, a significant rise in Social Security’s cost-of-living adjustment (COLA) is expected in 2027.
The Senior Citizens League now expects the 2027 Social Security COLA to rise 3.9%, up from its earlier 2.8% forecast, but warned higher Medicare, housing, utility and grocery costs could erase much of the benefit.
The group also said many seniors are struggling financially, with 57% reporting they skipped medical products or services in the past year because of costs.
Retirees on fixed incomes are being squeezed as essential expenses like healthcare, housing, utilities, and insurance keep rising faster than overall inflation, making affordability talks “even more important than ever” for seniors, said Senior Citizens League Executive Director Shannon Benton.
Benton also criticized proposals to use a chained Consumer Price Index, saying it would effectively reduce benefits by assuming retirees can lower their living standards as prices rise. “Policymakers should focus on strengthening the program in ways that protect retirees’ financial security, not trying to mask benefit cuts as something else,” she added.
Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson told Market Watch on Tuesday that COLA could increase by approximately $87 a month for Social Security benefits. She predicts the COLA could climb as high as 4.2% in 2027, up from 2.8% this year, driven by continued economic pressures from the war with Iran.
Before the Iran war began in late February, Johnson had forecast a 1.2% COLA increase for 2027. But rising fuel, energy, and grocery prices driven by the conflict have pushed the projected COLA up to 4.2%.
“This represents the highest rate of inflation since 2022 and a potentially significant erosion in many consumers’ standard of living,” said Johnson.
Americans Lean On Social Security
The COLA is designed to offset inflation rather than provide a pay raise, with adjustments tied to the CPI-W, which rose 3.8% year over year in April, according to the latest Labor Department data.
From 2026, a record 62% of retired Americans are now relying on Social Security as a major source of income. A Gallup survey found 42% of Americans cite Social Security as a major retirement income source, tying last year’s record high and outpacing work-sponsored pensions at 37% and retirement savings accounts like 401(k)s and IRAs at 27%.
The poll also showed a widening confidence gap, with 82% of retirees saying they have enough money to live comfortably compared with just 45% of non-retirees who expect the same.
During an appearance on The Joe Rogan Experience in October, Elon Musk warned that rising U.S. debt and a projected Social Security Administration funding shortfall could push the country toward bankruptcy. Musk noted that Social Security may not be able to pay full benefits by 2032 and could cut payments within seven years. He argued that boosting economic output through AI and robotics is the only viable long-term solution.
Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.
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