Key Points
-
Arguably, no announcement is more anticipated than the annual cost-of-living adjustment (COLA) reveal, set for Oct. 14.
-
Two of President Trump’s policies are boosting consumer prices and lifting projections for next year’s Social Security raise.
-
In addition to a first-in-30-year event, tens of millions of retirees should enjoy their first silver lining since 2023.
- The $23,760 Social Security bonus most retirees completely overlook ›
For most retirees, Social Security provides more than just a monthly paycheck. According to a quarter-century of annual surveys by national pollster Gallup, Social Security income is, in some capacity, necessary for between 80% and 90% of retirees to make ends meet.
For the program’s nearly 55 million retired-worker beneficiaries, there’s arguably no announcement that’s more anticipated than the annual cost-of-living adjustment (COLA) reveal on Oct. 14. Social Security’s COLA is the near-annual “raise” given to beneficiaries to combat the effects of inflation (i.e., rising prices).
Although beneficiaries have received a raise in all but three years since 1975 (2010, 2011, and 2016), the projected payout increase for 2027 is set to make history in two different ways. The catalyst fueling these history-making moments is a COLA-driven “Trump bump,” courtesy of President Donald Trump.
President Trump’s policies are directly affecting consumer prices (and Social Security’s COLA)
A modest level of inflation is ideal and perfectly normal when the U.S. economy is expanding. This is why the Federal Reserve targets a long-term inflation rate of 2%.
But in May, trailing 12-month inflation reached a three-year high of 4.2%. The culprit behind this surge in consumer prices, for a second consecutive year, is two of President Trump’s policies.
The first policy that’s moving the price needle is the president’s tariffs. In April 2025, Trump introduced sweeping global tariffs and higher reciprocal tariffs on dozens of countries deemed to have unfavorable trade balances with America. Even though these tariffs were struck down by the U.S. Supreme Court just 10 months later, their imposition boosted consumer prices last year, leading to a modest Trump bump for Social Security’s 2026 COLA.
We should see something similar take place with Social Security’s 2027 COLA, courtesy of Trump’s tariff and trade policy. In July, the Trump administration imposed sweeping global tariffs on more than 80 countries, using a different justification than what the Supreme Court invalidated. Adding duties to imported, unfinished goods risks increasing domestic manufacturing costs, which are then passed on to consumers.
BREAKING: August CPI inflation comes in at 3.4%, in-line with expectations of 3.4%
Core CPI inflation falls to 2.4%, also in-line with expectations of 2.4%.
Month-over-month CPI inflation rose +0.4%, the biggest increase since May 2026.
Treasury yields are rising on the news.
— The Kobeissi Letter (@KobeissiLetter) September 11, 2026
The Trump-led Iran war is the second policy that’s directly affecting consumer prices.
Shortly after the president approved military attacks against Iran on Feb. 28, the latter closed the Strait of Hormuz to most commercial vessels. For seven months, this action has stymied the daily flow of approximately 20 million barrels of petroleum liquids. Removing and/or rerouting a fifth of the world’s crude oil supply sent fuel prices soaring.
However, the largest modern-day energy supply disruption is only part of the story. While higher fuel prices are having the most direct impact on consumers’ wallets, we’re also seeing evidence that the effects of the Iran war have reached the broader economy.
For example, headline inflation fell from its three-year high of 4.2% in May to 3.4% in July, driven lower by a temporary decline in crude oil prices. But Core Personal Consumption Expenditures, which excludes volatile food and energy costs, has eased only slightly from 3.5% in May to 3.3% in July.
Higher costs for petroleum-based products, costlier transportation methods, rerouted shipments, and altered supply chains are expenses that businesses appear to be passing on to consumers.
Social Security’s 2027 Trump bump-fueled raise should be unique
Given that Social Security’s cost-of-living adjustment is designed to offset inflation, next year’s projected raise is on track to be historic.
Following the release of the August inflation report, The Senior Citizens League, a nonpartisan senior advocacy group, eased its 2027 COLA projection by a tenth of a percent to 3.5%. Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson slightly increased her previous 2027 COLA forecast from 3.4% to 3.5%.
If these two independent estimates, both calling for a 3.5% boost to monthly benefits in 2027, prove accurate, it would mark a tie for the sixth-largest percentage increase over the last 35 years. But that’s not where history comes into play.
A 3.5% cost-of-living adjustment would also represent the sixth consecutive year in which benefits have grown by at least 2.5%, with increases of 5.9% (2022), 8.7% (2023), 3.2% (2024), 2.5% (2025), and 2.8% (2026) preceding it. The last time Social Security beneficiaries enjoyed six straight years with annual COLAs of at least 2.5% was 30 years ago, from 1988 through 1997!
BREAKING: 71 million Social Security beneficiaries will see a 2.8% cost-of-living adjustment (COLA) beginning in January 2026. The average annual increase over the last decade: 3.1%.https://t.co/l5IYmkf6Ih pic.twitter.com/pgqtPLgqMB
— Charlie Bilello (@charliebilello) October 24, 2025
In addition to a sixth consecutive year with an above-average COLA for the first time in three decades, history should be made for the tens of millions of retired-worker beneficiaries enrolled in traditional Medicare.
Traditional Medicare consists of three Parts: A (in-hospital stays), B (outpatient services), and D (prescription drugs). Though Part A is free for approximately 99% of workers, Part B has a standard monthly premium of $202.90 in 2026. This premium is typically deducted from a retiree’s monthly Social Security payout.
Throughout most of the 21st century, Medicare’s monthly Part B premium has consistently risen at a faster pace, in percentage terms, than Social Security’s COLA. Whereas Social Security checks rose by 3.2%, 2.5%, and 2.8% over the last three years, Medicare’s Part B premium has surged by 5.9% (2024), 5.9% (2025), and 9.7% (2026), respectively. This dynamic results in retirees giving up some or all of their annual COLA.
However, 2027 offers a possible silver lining. The 2026 Medicare Trustees Report estimates that the standard Part B premium will increase 3.25% in 2027 to $209.50/month. If this projection and Social Security’s independent estimates prove accurate, it’ll mark the first time since 2023 that Social Security’s COLA will increase by a larger percentage than the Part B premium.
For tens of millions of retired-worker beneficiaries, this unique situation should enable them to hang onto more of their annual Social Security raise.
The $23,760 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Join Stock Advisor to learn more about these strategies.
The Motley Fool has a disclosure policy.
