In March, the average retired worker brought home a Social Security benefit of $2,079.49. Though this annualizes to less than $25,000, this income is nevertheless vital to helping aged workers make ends meet.
For many of the 54.1 million retired workers currently receiving a Social Security payout, no annual announcement is of greater importance than the cost-of-living adjustment (COLA), which is revealed by the Social Security Administration (SSA) in October.
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For a second consecutive year, Social Security’s COLA is subject to an interesting quirk. Namely, actions taken by President Donald Trump will directly affect how much beneficiaries are bringing home each month in 2027.
President Trump delivering remarks. Image source: Official White House Photo by Joyce N. Boghosian, courtesy of the National Archives.
However, before digging into the details of how President Trump’s policies can impact Social Security payouts (again), it’s important to understand what Social Security’s cost-of-living adjustment is and how it’s calculated.
Imagine that you’re looking at a basket of hundreds of goods and services that seniors regularly purchase, and you notice that the aggregate cost of this basket has increased by 2% from the previous year. If Social Security benefits remained unchanged, recipients would lose buying power over time. Social Security’s COLA is the near-annual “raise” passed along to recipients that attempts to keep them on par with inflation (i.e., rising prices).
For the last 51 years, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been the program’s inflationary tether. The CPI-W has over 200 spending categories with unique percentage weightings. These percentages allow the CPI-W to be expressed as a single figure each month to quickly determine if prices are collectively rising (inflation) or falling (deflation).
Although the U.S. Bureau of Labor Statistics reports the CPI-W monthly, only trailing 12-month readings from the third quarter (July – September) are used in the cost-of-living adjustment calculation. If the average third-quarter CPI-W this year is higher than the same period in 2025, beneficiaries are due a raise.
The amount that benefits rise is determined by the year-over-year percentage increase in average third-quarter CPI-W readings, rounded to the nearest tenth of a percent.
A higher inflation rate has led to larger Social Security COLAs in recent years. US Inflation Rate data by YCharts.
Making history has been something of the norm for America’s foremost retirement program over the last year. In May 2025, the average retired-worker benefit surpassed $2,000 for the first time since Social Security’s inception.
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Additionally, the 2.8% cost-of-living adjustment passed along this year marks the fifth consecutive year that benefits have risen by at least 2.5%. The last time that happened was three decades ago.
But what’s noteworthy about the 2.8% raise beneficiaries received in 2026 is that it was aided by a “Trump bump.” Donald Trump’s tariff and trade policy increased prices on select imported goods and domestic manufacturers, leading to sticky goods sector inflation. In other words, Trump’s tariffs directly led to higher nominal Social Security checks for recipients this year.
Based on early estimates for Social Security’s 2027 COLA, beneficiaries are likely to see a Trump bump, yet again — but this has nothing to do with tariffs.
At President Trump’s command, U.S. military forces, along with Israel, commenced attacks on Iran beginning Feb. 28. Shortly after this conflict began, Iran closed the Strait of Hormuz to virtually all oil shipping traffic. The Iran war has precipitated the largest energy supply disruption in modern history.
Over the last seven weeks, crude oil prices have soared, and fuel prices have followed suit. Consumers are getting pinched at the pump as gas prices soar, while businesses are paying more for transportation and/or production costs. This energy price shock is beginning to show up in the monthly U.S. inflation report, and it’s having a tangible impact on 2027 COLA forecasts.
According to nonpartisan senior advocacy group The Senior Citizens League (TSCL), the 2027 COLA is expected to be 2.8%. Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson anticipates the 2027 raise will be 3.2% — nearly double her previous forecast of 1.7% before the Iran war began.
If we were to use the middle ground between these two estimates (3%) as the base COLA case for 2027, the average retired-worker beneficiary would see their monthly payout rise by more than $62.
In comparison, the average worker with disabilities and the average survivor beneficiary would see their monthly checks each climb by approximately $49 in 2027.
Image source: Getty Images.
While Trump’s actions are expected to have a notable impact on Social Security benefits for a second consecutive year, a potentially beefier raise for 2027 won’t offset what’s been decades of disappointment for retirees.
Although the CPI-W is designed to closely mirror the effects of inflation on program recipients, it hasn’t done a good job of this.
The problem is evident in its full name: the Consumer Price Index for Urban Wage Earners and Clerical Workers. “Urban wage earners and clerical workers” are typically working-age individuals who aren’t currently receiving a retired-worker benefit. Even though 87% of Social Security’s beneficiaries as of December 2024 were 62 or older, the program’s inflationary index is tracking the spending habits of predominantly working-age Americans — and that’s a problem.
Working-age individuals and retirees spend their money differently, with seniors apportioning a higher percentage of their budgets to shelter and medical care services. The CPI-W simply isn’t accounting for the added importance of these expense categories for retirees.
To make matters worse, Social Security has been without its silver lining for three consecutive years. This is to say that Medicare’s Part B premium — the outpatient services segment of traditional Medicare — has been climbing at a rapid pace, leading to partial or even full offsets of annual COLAs.
According to TSCL, the buying power of Social Security income has plummeted by 20% from 2010 to 2024. A modest Trump bump in back-to-back years isn’t going to alter decades of weakening purchasing power.
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Social Security’s 2027 Cost-of-Living Adjustment (COLA) Estimate Is Getting a “Trump Bump” — Here’s How Much Extra You Might Receive was originally published by The Motley Fool
