Millions of Americans who rely on Social Security could be on track for a benefit increase as a result of inflation during President Donald Trump’s second term.
Experts say beneficiaries may receive one of the larger cost-of-living adjustments (COLA) in recent years in 2027, boosting monthly payments for nearly 75 million retirees and disabled Americans.
While a bigger COLA would put more money into beneficiaries’ pockets, the increase is not necessarily good news, as economists say it merely reflects that rising consumer prices are continuing to erode seniors’ purchasing power, leaving them struggling to keep up with housing and health care costs.
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“While a higher Social Security check may sound like good news when retirees hear projections of an increase, they have to remember COLA is compensation for lost purchasing power rather than a true raise, so seniors are not necessarily better off if everyday costs continue to trend higher,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
Why It Matters
Social Security benefits are adjusted annually through the COLA formula, which is designed to help recipients maintain their purchasing power when inflation rises.
The latest estimates suggest 2027 could bring a COLA between 3.5 percent and 3.6 percent, according to The Senior Citizens League (TSCL) and AARP.
If those estimates hold, it would mark the second straight year of above-average increases and continue what many have dubbed the “Trump Bump.”
For the roughly 75 million Americans receiving Social Security or Supplemental Security Income (SSI), even a small percentage increase can translate into hundreds of additional dollars over the course of a year.
What to Know
Social Security recipients received a 2.8 percent COLA for 2026, raising average retirement benefits by about $56 per month.
Now, forecasts indicate retirees could see a larger increase in 2027. AARP estimates a 3.5 percent COLA, while TSCL projects 3.6 percent.
Using AARP’s estimate, the average retired worker receiving approximately $2,086 per month in July 2026 would receive about $73 more each month, bringing average benefits to roughly $2,159. Over a full year, that would amount to around $876 in additional benefits.
“These tariffs could indirectly produce a larger Social Security COLA next year through a raise in the cost of imported goods, adding to inflationary pressures already being felt due to the military conflict in Iran,” Beene said.
However, the official figure will not be finalized until October, after the Social Security Administration reviews inflation data from July, August and September.
Why Is It Being Called a ‘Trump Bump’?
The nickname stems from the relationship between inflation and Social Security benefit increases.
COLAs are not determined by congressional action or presidential approval. Instead, they are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
However, the tariffs implemented during Trump’s presidency and energy market disruptions tied to conflict in the Middle East have contributed to the inflationary pressures that are now feeding into the COLA calculation.
“What most people misunderstand is that a lower inflation rate does not mean prices are coming down. It simply means prices are rising at a slower rate. CPI measures changes in the price level over time, and the percentage change tells us the rate of inflation,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
“So, if inflation was higher in 2025 and slows in 2026, that could put downward pressure on the Social Security COLA for the upcoming year, even though retirees are still paying substantially higher prices than they were a few years ago,” he added.
So beneficiaries may receive larger checks, but only because everyday goods and services have become more expensive, experts say.
“Calling a higher Social Security COLA a ‘Trump bump’ gets the economics backwards,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “A higher COLA isn’t a bonus. It’s compensation for prices that already went up.”
It’s Not All Good News
While retirees generally welcome larger benefit payments, experts have long warned that COLAs can be a double-edged sword.
A larger adjustment often signals that inflation remains elevated. In other words, beneficiaries receive more money because the cost of groceries, rent, utilities and medical care has increased.
“If tariffs are contributing to that inflation, calling the resulting COLA good news is a little like a cigarette company taking credit for a bump in business at the funeral home,” Ryan said. “You’re celebrating the compensation while ignoring what caused the damage.”
On top of this, some feel CPI-W index may not accurately capture the spending patterns of retirees because it primarily tracks working-age households rather than seniors.
As a result, some beneficiaries may still find themselves financially squeezed despite receiving a larger monthly payment.
“A 15 percent increase in energy costs is felt today, but the COLA comes the following year,” Thompson said. “That does nothing to address the immediate negative impact on someone living on a fixed income.”
What Could the COLA Look Like Next Year?
- Projected 2027 COLA: 3.5% to 3.6%
- Current average retirement benefit: About $2,086 per month
- Estimated monthly increase: Roughly $73
- Estimated annual increase: Around $876
- Americans receiving Social Security or SSI: Nearly 75 million
What Happens Next
The Social Security Administration will continue collecting inflation data through September before calculating the official COLA.
The final adjustment for 2027 is expected to be announced in October and will take effect with benefit payments beginning in January 2027.
“The better question is not how large the January check looks but whether it buys more than this year’s check, and if inflation remains elevated, much of the benefit could disappear before it ever reaches their budgets,” Beene said.
Contact Newsweek editors on this story: Jason Lemon and Cristina Diciu.
