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Image source: Getty Images.<\/p>\n
Just how bad is inflation?<\/p>\n
The standard inflation measure used in the U.S. is the Consumer Price Index for All Urban Customers (CPI-U). It tracks the prices of goods and services such as food, transportation, medical care, and energy.<\/p>\n
The CPI-U in March was up 3.3%, with most of the increase driven by higher energy costs. Energy inflation was up 10.9%, but gasoline was much worse, up 21.2%.<\/p>\n
Retirees may not feel the increase in costs for things like apparel or education as much, but higher gas prices are having a real effect on people’s wallets.<\/p>\n
If your benefit was $2,000 in 2025 and you now receive $2,056 after the 2.8% COLA, the $56 extra each month doesn’t go as far if it’s costing you an extra $20 every time you fill up your tank.<\/p>\n
Inflation could lead to a larger COLA<\/p>\n
The only silver lining is that if current inflation continues through the third quarter (July, August, and September), the 2027 COLA could be one of the highest in a few years.<\/p>\n
Social Security sets the annual COLA based on changes in the CPI-W rather than the CPI-U, but many of the items it measures overlap, including energy prices. And since the CPI-W gives more weight to gasoline, it’s likely to be higher than the CPI-U.<\/p>\n
Social Security looks at the average CPI-W in the third quarter of each year, compares it to the previous year’s average, and sets the COLA to the percentage increase (if there’s no increase, there’s no COLA for the upcoming year).<\/p>\n