Key Points
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Donald Trump's tariffs and the Iran war are directly affecting consumer prices and providing a historic boost to next year's estimated cost-of-living adjustment (COLA).
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Based on the latest independent estimates, Social Security's COLA is about to do something that hasn't been achieved in 30 years.
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Furthermore, tens of millions of retired-worker beneficiaries may be able to retain more of next year's raise.
- The $23,760 Social Security bonus most retirees completely overlook ›
For the last 25 years, Gallup has conducted annual surveys to gauge the importance of Social Security income to the average retired worker. These polls have consistently shown that 80% to 90% of retirees rely on their monthly payout to cover some of their expenses.
Given how foundational Social Security income is to the financial well-being of our nation's aging workforce, few announcements are more anticipated than the annual cost-of-living adjustment (COLA) reveal in October.
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Social Security's COLA is effectively an annual raise passed on to beneficiaries that attempts to offset the effects of inflation (rising prices) and ensure recipients don't lose purchasing power. For example, if a broad basket of goods and services that seniors regularly purchase rises in cost by 3% from one year to the next, Social Security benefits would need to climb by the same percentage to avoid a loss of buying power.
Social Security's 2027 COLA comes with two projected surprises. In addition to a second consecutive year with a "Trump bump," next year's raise should come with a silver lining for tens of millions of retired workers.
The largest Trump bump to date may lead to a historic Social Security raise in 2027
In 2026, Social Security's more than 71 million recipients (retired workers, workers with disabilities, and survivor beneficiaries) received a 2.8% boost to their monthly payout. While some degree of inflation is expected annually, this year's raise was influenced, in part, by President Donald Trump's policies.
In April 2025, the president unveiled his long-touted tariff and trade policy, which included a sweeping global tariff and dozens of higher reciprocal tariffs on countries deemed to have unfavorable trade imbalances with America. Even though most of these tariffs were struck down by a February 2026 U.S. Supreme Court ruling, the modest inflationary impact these added duties had on consumer prices last year provided a boost to Social Security's 2026 COLA.
In 2027, beneficiaries could see something of a double Trump bump.
Although the president's April 2025 tariffs were overturned, this hasn't stopped the administration from imposing sweeping global tariffs using different justifications. Ongoing duties applied to select imported goods will continue to exert upward pressure on consumer prices and modestly lift the prevailing inflation rate.
BREAKING: July CPI inflation falls to 3.4%, in-line with expectations of 3.4%
-- The Kobeissi Letter (@KobeissiLetter) August 12, 2026
Core CPI inflation falls to 2.5%, also in-line with expectations of 2.5%.
Month-over-month CPI inflation rose +0.1%, up from -0.4% in June.
US stock market futures are rising on the news.
However, the more prominent inflationary push is coming from the Iran war. Shortly after Trump ordered attacks against Iran on Feb. 28, the latter closed the Strait of Hormuz to virtually all maritime traffic. This effectively halted the flow of a fifth of the world's petroleum liquids, sending fuel prices soaring.
These policies are expected to boost Social Security's 2027 COLA in historic fashion. According to the latest estimates from The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, and Mary Johnson, an independent Social Security and Medicare policy analyst, next year's raise is projected to reach 3.6% and 3.4%, respectively. The average of these estimates (3.5%) would tie for the sixth-largest cost-of-living adjustment over the last 35 years.
Furthermore, these independent estimates suggest that beneficiaries will receive a sixth consecutive year with a raise at or above 2.5%. The last time benefits grew by at least 2.5% for six straight years was from 1988 through 1997.
But a Trump bump-driven COLA may not be the highlight of next year's raise for tens of millions of retired workers.
For the first time since 2023, Social Security's silver lining is in play
Throughout much of the 21st century, Social Security income has been losing purchasing power. A report published in July 2024 by TSCL pegged this loss of buying power at 20% from 2010 to 2024.
Although several factors are responsible for this persistent loss of purchasing power, including inherent flaws in the Consumer Price Index for Urban Wage Earners and Clerical Workers -- the inflationary measure used by the Social Security Administration to calculate annual COLAs -- Medicare's Part B premium plays a meaningful role.
Traditional Medicare, available to individuals aged 65 and above, has three components: Part A (in-hospital stays), Part B (outpatient services), and Part D (prescription drugs). While approximately 99% of retired workers pay nothing for Part A, there's a standard premium for Part B of $202.90 in 2026. The Part B premium is usually deducted from a retired worker's monthly Social Security benefit.
For well over a decade, the annual percentage increase for Part B premiums has outpaced Social Security's annual COLA with consistency. For instance, Social Security's annual COLAs over the last three years of 3.2% (2024), 2.5% (2025), and 2.8% (2026) pale in comparison to Part B premium hikes of 5.9% (2024), 5.9% (2025), and 9.7% (2026). This dynamic means that Social Security recipients aren't receiving the full benefit of their annual raise.
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
But based on the latest Medicare Trustees Report, a silver lining appears to be in the cards in 2027 for the tens of millions of retired workers enrolled in traditional Medicare.
The 2026 Medicare Trustees Report estimates the standard Part B premium will rise 3.25% to $209.50/month next year. Meanwhile, the two aforementioned independent Social Security COLA estimates call for benefits to rise by 3.4% or 3.6%. For the first time since 2023, when the Part B premium actually declined by 3%, Social Security's COLA is projected to rise by a higher percentage than the Part B premium.
Although this silver lining won't claw back decades' worth of lost purchasing power, it should allow tens of millions of retired-worker beneficiaries to retain more of their cost-of-living adjustment in the upcoming year.
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