Social Security's 2027 Cola Is On Track To Be Histor…
Trumpflation may yield the fourth-largest Social Security COLA since 1992
Although President Donald Trump’s tariff and trade policy continues to impact prices within the goods sector, the lion’s of America’s recent inflationary surge can be traced to the Iran war.
Shortly after Trump gave the order for the U.S. military to attack Iran on Feb. 28, the latter essentially closed the Strait of Hormuz to commercial vessels. In doing so, Iran halted the daily flow of approximately 20 million barrels of petroleum liquids, sending fuel prices soaring. Gas prices rose at the fastest pace in over three decades, while diesel prices jumped at an even steeper percentage.
Even if the Iran war ends fairly soon, the staggered effects of the largest energy supply disruption in modern history will continue to be felt for several quarters. As businesses contend with rising transportation and production costs and inflation spills into the broader economy (i.e., beyond the energy industry), prices can rise further.
This Trump-driven price surge (“Trumpflation”) has boosted trailing 12-month inflation from a modest 2.4% in February to 4.2% in May. It’s also rapidly increased independent estimates for Social Security’s 2027 COLA.
BREAKING: May CPI inflation rises to 4.2%, the highest level since April 2023.
Core CPI inflation also rises to 2.9%, the highest since September 2025.
Inflation in the US is officially back above 4% and more than double the Fed’s target.
Odds of Fed rate hikes are rising.
— The Kobeissi Letter (@KobeissiLetter) June 10, 2026
Nonpartisan senior advocacy group The Senior Citizens League edged its 2027 COLA projection lower to 3.8% from 3.9% after the May inflation report was released. However, its 3.8% forecast is up from 2.8% ing the February and March inflation reports.
The high-water mark comes from independent Social Security and Medicare policy analyst Mary Johnson, who now sees Social Security checks soaring by 4.7% in 2027. For context, Johnson’s COLA forecast was just 1.7% a few months ago. A 4.7% COLA would be the fourth-largest percentage raise for Social Security benefits since 1992, exceeded only by increases of 5.8% in 2009, 5.9% in 2022, and 8.7% in 2023.
If Johnson’s estimate hits the nail on the head, the average retired-worker beneficiary would see their monthly payout climb by roughly $98 in 2027. Meanwhile, the typical worker with disabilities and survivor beneficiary would receive “Trump bumps” equivalent to $77/month and $76/month next year, respectively.
Image source: Getty Images.
A larger Social Security benefit can expedite the timeline to sweeping benefit cuts
While it’s fair to say that nearly every Social Security beneficiary dreams of a nominally larger payout each year, there’s a steep price to pay for progressively larger cost-of-living adjustments.
Earlier this month, the Social Security Board of Trustees published its annual report detailing the program’s financial health. Social Security’s projected long-term (75-year) funding shortfall ballooned to $29.3 trillion in the latest report from an estimated $25.1 trillion last year.
But what’s more worrisome is the projected asset reserve depletion of the Old-Age and Survivors Insurance trust fund (OASI), which pays monthly benefits to 54.3 million retired workers and 5.8 million survivors of deceased workers. While the OASI is in no danger of bankruptcy, insolvency, or halting payouts, the sustainability of the existing benefit schedule, including annual COLAs, is very much in question.
If the OASI depletes its asset reserves by the fourth quarter of 2032, as currently forecast, retired workers and survivors could see their benefits slashed by up to 22%!
BREAKING: The Social Security trust fund is on track to run out of money in late 2032, its trustees said.
It’s three months sooner than projected last year.
— unusual_whales (@unusual_whales) June 9, 2026
Several of President Trump’s decisions may worsen Social Security’s financial outlook and accelerate this timeline to sweeping benefit cuts.
For example, the annual Trustees Report relies on modest forward-looking COLA projections. If next year’s Trump bump clocks in at 4.7% (or higher), it threatens to drain the OASI’s asset reserves even faster.
Furthermore, the president’s flagship tax and spending law, the “Big, Beautiful Bill,” introduced several temporary tax breaks from 2025 through 2028 that are expected to adversely impact Social Security. While the senior deduction, no tax on tips, and no tax on overtime provisions enable some Americans to retain more of their income, it shrinks the pool of earned income (wages and salaries, but not investment income) subject to the 12.4% payroll tax. The payroll tax is Social Security’s primary funding source, accounting for more than 91% of its income in 2025.
According to a projection from the Social Security Administration’s Office of the Actuary (OACT), Trump’s tax and spending law will increase program costs by $168.6 billion from tax years 2025 through 2034. The OACT also estimated that the Big, Beautiful Bill would shorten the timeline to the OASI’s asset reserve depletion by three months.
While a larger monthly benefit probably sounds great on paper, it comes with serious consequences for Social Security’s financial health.
Read Next
•By Selena Maranjian
How Much Annuity Income Can You Buy with $100,000?
•By Stefon Walters
Here’s How Much More You’d Receive by Waiting Until 70 to Claim Social Security
•By Maurie Backman
2032 Could Mark a Major Milestone for Social Security
How to Tell If Your 401(k) Is Invested Right for Your Retirement Timeline
The 2027 Social Security COLA Announcement Is Just 4 Months Away. Here’s Where Things Stand.
About the Author
Sean Williams is a data-driven Motley Fool contributing analyst who’s been investing for 27 years and has penned north of 16,000 articles. You’ll find him at the intersection of politics and investing tackling macroeconomic topics of interest (Social Security and Donald Trump’s economic/tax policies), analyzing which stocks billionaire investors (e.g., Warren Buffett) are buying and selling, and digging into how the world’s most-influential businesses and trends — everything from the evolution of artificial intelligence (AI) to the next stock split — are changing Wall Street. He holds a B.A. in Economics from the University of California, San Diego.
Sumber Artikel:
Fool.com